Fed to slow the pace of hikes in 2019 - ING

Analysts at ING see the US economy facing more headwinds as we move into 2019.

Key Quotes

“The massive fiscal stimulus of tax cuts and increased Federal spending early this year won’t be repeated and the support from that stimulus will gradually fade. Tighter financial conditions in the form of higher US borrowing costs and the stronger dollar will also act as a brake on growth. Then there is the gradual drag from trade tensions that will impact supply chains and put up the cost of doing business, while emerging market weakness could start to exert more of a drag on global and US activity. This should help to dampen inflation pressures in the medium term.”

“That is not to say the US economy runs the risk of a sharp downturn - we still think the economy will expand a very healthy 2.3% next year versus 2.9% this year – but we wouldn’t be surprised to see a slower pace of interest rate rises in 2019.”

“After four hikes in 2018, we are looking for a more conservative two rate moves next year, with 1Q19 and 3Q19 our favoured periods.”