U.S.:
Fed rate hike expected next week, three hikes expected in 2018: Reuters poll
The U.S. Federal Reserve is almost certain to raise interest rates later this month, according to a Reuters poll of economists, a majority of whom now expect three more rate rises next year compared with two when surveyed just weeks ago. The results, from a survey taken just before the U.S. Senate voted to pass tax cuts that are expected to add about $1.4 trillion to the national debt over the next decade, show economists were already becoming more convinced that rates will need to go even higher. While about 80 percent of economists surveyed in October said such tax cuts were not necessary, the passage of the bill, President Donald Trump’s first major legislative success, means the forecast risks have shifted toward higher rates, and faster. The poll’s newly raised expectations for three rate rises next year are now in line with the Fed’s own projections. But they come despite a split among U.S. policymakers on the outlook for inflation, which has remained persistently low. That is a similar challenge faced by other major central banks, who are generally turning away from easy monetary policy put in place since the financial crisis, looking through still-weak wage inflation and overall price pressures for now.
Europe:
UK factories plan to ramp up investment
British factories intend to increase investment at the strongest pace in four years, adding to signs that manufacturing will help support an otherwise sluggish economy in 2018, an industry survey showed on Monday. Europe’s fast-recovering economy has helped Britain’s factory sector grow quickly at the end of 2017, according to the quarterly report from manufacturing association EEF and accountants BDO. Other surveys in recent weeks have also shown a pickup in British manufacturing activity. Still, the sector makes up only a tenth of overall British economic output and growth in the services sector — which is roughly eight times as big — has been patchier. Higher inflation largely caused by the fall in the pound after last year’s Brexit vote has pushed up costs for households and businesses this year, contributing to Britain’s lagging economic performance compared with European peers. The Confederation of British Industry on Monday predicted economic growth of around 1.5 percent this year will be repeated in 2018, describing Britain’s performance as “steady but subdued”.
Asia;
Special Report: Hidden peril awaits China’s banks as property binge fuels mortgage fraud frenzy
When Zhu Chenxia bought a flat early last year from Lei Yarong in the up-market Nanshan district of China’s southern metropolis of Shenzhen, the two women drew up three purchase agreements to cover the deal. Only one was genuine. In the legitimate contract, Zhu agreed to pay Lei 6.49 million yuan (about $980,000) for the 96-square-meter apartment near the city’s border with Hong Kong, according to records filed in a Shenzhen court. With the help of her property agent, Zhu cooked up a second contract with Lei that overstated the value of the flat at 7 million yuan. This one was for the bank. If Zhu had presented her lender with the true purchase price, she would only have been entitled to borrow up to 70 per cent of that amount, or 4.54 million yuan. Chinese regulations stipulate that first-home buyers in some major cities must make a down payment of at least 30 percent to reduce bank exposure to risk. The higher valuation convinced the Bank of China to lend Zhu 4.85 million yuan, leaving the lender less buffer against a price drop.
Fitch: World Growth to Remain Strong in 2018; Reality Checks Await Beyond
Global growth momentum remains strong and is likely to be sustained by an increasingly positive outlook for investment, says Fitch Ratings in its latest Global Economic Outlook (GEO). World growth is now estimated at 3.2% this year and indications are that 2018 will be equally robust with growth to edge up to 3.3% next year. “The lack of global inflation in the face of positive growth surprises is allowing exceptionally accommodative global monetary policy settings to co-exist with strong growth outturns and prospects. However, caution is warranted on how long this combination can persist. Beyond 2018, it seems highly likely that global growth will moderate, while monetary policy conditions will tighten,” said Brian Coulton, Fitch’s Chief Economist. In advanced economies, financial conditions remain very supportive, the drag from fiscal policy tightening has gone, and the investment cycle is firming up. Meanwhile, tight labour markets are bolstering consumer confidence and household spending.