Central banks in focus: assessing the path ahead for the Fed
US economy: We expect the US economy to grow above potential in 2019 and to gradually converge to its long-term growth rate of around 2% in 2020 as the boost provided by fiscal expansion in 2018 will gradually lose steam.
With the economy running above potential and the labour market becoming tighter, the Fed may choose to continue normalising and hiking rates until signs of a deceleration in growth materialise. The Fed’s expectations regarding inflation are broadly aligned with our own forecasts (2.2% Amundi vs 2.3% Fed median), but risks remain tilted to the upside.
In our view, the Fed will be more cautious than in 2018 and we expect a pause in the hiking cycle by mid-2019 at the latest. The Fed has also made clear that it will not change its strategy for shrinking the balance sheet:
Read the complete white paper at the link beneath Related Files