U.S. growth may have peaked, but Fed to conduct 3 rate hikes next year: UK think tank

Source: Xinhua| 2018-11-23 05:25:56|Editor: yan

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LONDON, Nov. 22 (Xinhua) -- U.S. economic growth may have peaked, but the Federal Reserve is expected to press ahead with three interest rate hikes next year, one more than market expectations, British think tank Oxford Economics said Thursday in a report.

"Resilience remains the key theme for the U.S. economy post-midterm elections. Real GDP growth is trending at 3 percent in the fourth quarter," the report said.

Policy headwinds from reduced fiscal and monetary stimulus, along with trade tensions with China, will curb momentum in 2019. But the U.S. economy should still be able to grow at 2.5 percent next year, it said.

Oxford Economics forecast that the U.S. economy could expand at 2.9 percent in 2018, and slow down to 2.5 percent next year.

According to the U.S. Bureau of Economic Statistics, the U.S. economy grew at an annual pace of 3.5 percent in the third quarter and 4.2 percent in the second quarter this year,

The Fed has raised its benchmark interest rate for the third time this year in September, and it has also indicated another possible rate hike in December.

For the 19-member euro zone, the think tank downgraded its 2018 GDP forecast to 1.9 percent, after weak growth in the third quarter.

The euro zone GDP rose by just 0.2 percent in Q3, largely reflecting transitory weakness in Germany. "We expect a rebound in Q4, with our 2018 and 2019 GDP forecasts revised slightly lower to 1.9 percent and 1.6 percent, respectively," it said.

Oxford Economics also predicted a moderate deceleration in global economic growth, dipping from 3.1 percent in 2018 to 2.8 percent in 2019, and further down to 2.7 percent in 2020.

"Our estimate of global GDP in Q3 (of 2018) indicates that quarterly growth eased from 0.9 percent in Q2 to 0.7 percent in Q3 -- the weakest result since Q3 2016," Oxford Economics said.

Tighter monetary policy, declining liquidity, high debt levels and lofty asset prices could cause a more pronounced financial market sell-off that results in a sharper-than-expected slowdown, it said.

"We attach a 20-percent probability to a global recession over the next couple of years," it added.

Oxford Economics is an independent global advisory firm, providing reports, forecasts and analytical tools on 200 countries and regions as well as some 100 industrial sectors.