11 to 17 June: You can go your own way

Last week saw 3 big central bank meetings, which served to reiterate the varying fortunes of the US, Europe and Japan since the crisis.

• In the US, the FED raised rates and upgraded forecasts as they predicted 4 rate hikes for 2018 and a continuation of one of the longest economic cycles in history.
• In Europe, the ECB called an end to QE, but remained accommodative, not believing that sustained and meaningful growth and inflation are yet achievable.
• In Japan, the BOJ held firm with their “super-sized” version of unconventional policy, continuing QE and negative rates indefinitely, acknowledging that there is no sign of price growth despite almost no unemployment.

Relative to our expectations, it was the FED that caused us to pause for thought. After a dovish set of minutes to the previous meeting, the statement and projections were clearly hawkish. We think the difference lies in the time horizon; whilst 2018 could indeed see 2 further hikes, we think the pace of change will slow in 2019.

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