Economic Outlook

Global Economic Outlook

In the US, the FOMC is expected to raise the fed funds rate by 25 basis points next week and three more times in 2018 by the same amount. The Senate and House will reconcile their tax reform bills, perhaps even before year-end. We have not changed our baseline forecasts because it has always been assumed that a modest tax reform bill would be passed. We expect a small positive impact on GDP growth in 2018 and 2019, of the order of magnitude of 0.1-0.2 percentage points each year. Our baseline forecast of 2.2% GDP growth in 2018 and 2019 reflects this, but there is some upside risk should the reform prove more powerful than expected. Given the persistently low yields on 10-year Treasuries, we have lowered our end-of-year forecasts, and we are currently expecting the 10-year Treasury yield to be 2.5% by end-2017 and 3.0% by end-2018.