International Financial Outlook Report – October 2018
Summary of key forecasts
- We maintain our forecast for UK bank rate to rise by 1.00% in Q3 2019. Financial markets had previously priced in a later rise, but are now aligned to our central view. The Brexit negotiations represent a key unknown, but we continue to assume a withdrawal agreement will be reached and ratified by March 2019.
- The US Federal Reserve is expected to next raise rates in December, taking interest rates to 2.5%. We see two further increases next year to 3%. The ECB is expected to complete its QE programme this year and start raising policy rates in Q3 2019.
- Our profile for UK 10-year bond remains rising, with yields at 1.7% at end-2018 and 1.8% by end-2019.
- In FX, we have left unchanged our end-2018 and end-2019 targets for both GBP/USD and EUR/USD, in part reflecting a firmer dollar. USD/CNY targets have been adjusted to account for persistent trade tensions.