• Global economy likely to continue growing modestly, central banks to keep policy unchanged in 2017

    Source: FxWire Pro - Commentary / 10 May 2017 14:47:16   Eastern Standard Time

    In recent weeks, certain foreign economies have released their first quarter growth data. The results imply that the global economy is growing at a moderate rate at present. China’s GDP expanded 6.9 percent year-on-year in the first quarter, while the euro area’s real GDP expanded almost 2 percent on a sequential basis. The U.K. economy continues to growth three quarters following the Brexit vote last year clouded the long-term economic outlook.

    Meanwhile, consumer price inflation has accelerated higher in 2017 as prices of energy have stabilized. However, economic growth rates generally are not strong enough yet to lead to a considerable rise in inflation. Therefore, most major central banks are expected to keep their monetary policy unchanged this year, noted Wells Fargo in a research report. The European Central Bank is expected to further dial back its monthly QE purchases later in 2017 and likely will stop purchasing bonds altogether next year. However, a rate hike by the ECB us unlikely until late 2018, stated Wells Fargo.

    The French presidential election of Emmanuel Macron eliminates a downside risk to the euro area economic outlook as a Le Pen presidency might have called into question the very long-run viability of the EU. There continue to be several geopolitical risks in the world; however, assuming that the geopolitical environment generally stays “behaved” the modest rate of global economy growth that has been underway in the past few years will generally continue, added Wells Fargo.