At their December meeting, the Fed made it clear that, while expecting further cuts, the pace of their easing steps will slow in the new year. That slowdown partly reflects uncertainty around trade tariffs and their implications for US inflation.

The same trade uncertainty is playing out differently elsewhere in the world. The PBoC for instance is grappling with another factor clouding the Chinese growth outlook, which is likely to push them toward further policy easing. For the ECB potential US trade tariffs add an additional layer of uncertainty for the growth outlook. While trade policies could also have a modest upward impact on Eurozone inflation, it still appears to be on a trajectory toward target levels. This should allow the ECB to bring rates to neutral and possibly beyond.

The BoJ has been reluctant in changing rates too rapidly and decided to keep rates on hold at their December meeting. While the pace of change remains gradual, we do expect further rate hikes from the BoJ. Economic conditions in Japan support such policy steps, and foreign trade policies should not derail this trajectory.