Global economic growth is strengthening - Wells Fargo

According to global GDP data, analysts from Wells Fargo see economic growth strengthening. They expect many central banks to remove policy accommodation further.

Key Quotes: 

“Global economic output appears to have strengthened this year, an observation that is corroborated by recently released GDP data. The year-over-year rate of real GDP growth in the Eurozone rose to a six-year high in Q3, and the British economy continued to expand at a modest pace. Growth in China edged down a bit in the third quarter, but the economy continued to grow at a respectable rate of nearly 7 percent. Looking forward, we expect that the global economic expansion will remain intact, although a return to the “boom” years of 2003-2007 does not look likely anytime soon.

Sluggish GDP growth and benign inflation has induced many central banks to adopt extraordinarily accommodative policy stances over the past few years. However, policy stances in many foreign economies are starting to evolve. The Bank of Canada has raised rates 25 bps on two separate occasions since July, and the Bank of England recently took back the 25-bp rate cut that it implemented in the aftermath of the Brexit referendum last year. The European Central Bank is dialing back the monthly purchase rate of its quantitative easing (QE) program.”

“Looking forward, we expect that many foreign central banks will remove policy accommodation further, albeit at a measured pace. The Bank of Canada likely will follow the Fed by hiking rates further next year, and the ECB should wind down its QE program by late 2018. As policy stances abroad become less accommodative, we look for the U.S. dollar to trend modestly lower vis-à-vis most foreign currencies.”