Gradually scaling back support despite low inflation

Despite the fact that core inflation in advanced economies has generally remained very low, policymakers are committed to reducing policy support and/or raising interest rates next year. Fed officials have strongly hinted that they will raise interest rates again in December. With a fiscal stimulus likely in the first months of next year and core inflation set to rise, we think that they will raise rates a further four times in 2018. Meanwhile, the Bank of England is likely to follow November’s rate hike with a further three next year. And the ECB will probably complete its “taper” by end-2019 but leave rates at rock bottom levels until late in 2019.