Author Archive

The US economy was not firing on all cylinders in 2017

This is a good time to take stock of how well the US economy did in 2017. Assuming Q4 GDP is in line with the current estimate from the Atlanta Fed (which is close to our own), 2017 growth will be 2.3%. This would mark a step-up from annual growth of 1.5% in 2016 – […]

Academic debates aside, Fed officials’ optimism is rising

A number of Fed officials have given speeches since the beginning of the year, sending mixed messages to markets in the process. Complicating matters, the discussion about the short-term cyclical outlook has become mixed up with an open debate about whether the Fed’s current flexible inflation targeting strategy is still the most appropriate, or whether […]

US tax bill looks set to pass

The Republican leadership seems to have corralled enough support to pass the tax bill approved in conference committee. The bill could be signed into law as soon as this week. The tax bill cuts the corporate tax rate to 21% from 35%, from January 2018. Global corporate taxation will move to a territorial regime, with […]

Fed’s enthusiasm on tax cut plans remains limited

The 13 December Fed decision – and Chair Yellen’s last press conference – was much as expected. The Fed hiked rates 25bps, bringing the interest rate on excess reserves to 1.5%. Meanwhile, Fed officials maintained their rate-hiking forecasts for next year: three rate increases, according to the ‘dot plot’. Chair Janet Yellen was cautious about […]

Effervescence, not exuberance

The key debate right now among economists revolves around how further will the expansionary phase of the US business cycle go. We are already over 100 months into the current phase (it started in July 2009), making it the third-longest period of post-World War II expansion. The longest was 119 months, between April 1991 and […]

Slow wage growth to keep Fed on prudent normalisation track

The November employment report revealed another ‘Goldilocks’ set of conditions for investors: employment growth remained firm, especially in cyclical sectors like manufacturing and construction. At the same time, wage growth stayed soft – which means the Federal Reserve is unlikely to shift its current prudent communication on interest-rate hikes (although it is still very likely […]

Fed rate unlikely to move much above 2% next year

After the quarter-point rate rise expected on 13 December, the Federal Reserve will have pushed through the three rate hikes it signalled earlier in the year. For once, it has not under-delivered. Meanwhile, the gradual, ‘passive’ decline in the Fed’s balance sheet has been mostly ignored by markets. Broader financial conditions have eased this year […]

A crucial step towards US tax cuts

With the approval of the Senate tax bill in the early hours of Saturday 2 December, a key step has been taken toward tax cuts. The next chapter in the process is to reconcile this tax bill with the House of Representatives’ version, most likely in a ‘conference committee’. We are leaving our 2018 US […]

Debt energised

As 2017 draws to a close, it is worth taking stock of this year’s highlights. On US financial markets, this year will probably be remembered as ‘Goldilocks’ time. Financial conditions have been very accommodative. Initial fears about the impact of the Federal Reserve’s monetary tightening have faded, since the Fed has hiked rates very gradually […]

How oil-rich Texas fares will be key for the US outlook

Texas, the second state by GDP after California, but better endowed than the latter with oil resources, has become a major driver of US growth, especially since the energy boom of the 2010s. What we’ve learned with the ups and downs of oil prices over the past few years is that high oil prices are […]

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