US tax bill looks set to pass
The tax bill continues to make its way through Congress at a swift pace, and now looks increasingly likely to be enacted into law this week.
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 a one-off tax on foreign investments to transition to the new system.
The tax cuts pose upside risks to our 2018-19 US growth forecasts. They come at a time of robust cyclical momentum, driven by solid synchronised global growth, and a sharp pick-up in domestic oil production.
There are also upside risks to our Fed rates profile. We see two hikes in March and June, but there is a rising possibility of additional hikes, depending on the impact of tax cuts on business confidence. Ultimately, wage growth and core inflation will be key.