Analysts at ING suggest that the US economy is going from strength to strength and it looks set to expand by 3% this year given that tax cuts will further fuel domestic demand and the softness of the dollar puts US exporters in a highly competitive position to benefit from the global upturn.
Key Quotes
“Inflation is also likely to rebound as distortions relating to cell phone data plans drop out of the annual comparison while robust economic activity, rising commodity prices and a gradual pick-up in wage growth add to price pressures –we could see 3% headline inflation this summer.”
“Having said that, we are currently forecasting no rate hike in 1Q18. Near-term activity data may be somewhat soft given bad weather in January and core inflation is likely to remain below 2% through to April. As such, incoming Federal Reserve Chair Jay Powell may choose to wait until the outlook is clearer before triggering consecutive hikes in Q2, Q3 and Q4. Nonetheless, with the Fed citing financial stability risks and loose financial conditions as additional reasons to raise interest rates, our forecast could be revised to insert a fourth hike, most probably for the March FOMC meeting.”
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