US Economic Outlook – 5 April 2019
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The US economy continues to cool towards trend. According to the third estimate, real GDP advanced by 2.2% annualized in 4Q18, instead of the previously estimated 2.6%. This compares to 4.2% annualized growth achieved in 2Q18, and a 3.4%-pace in 3Q18. 1Q19 developments remain clouded by distortions from the government shut-down, bad weather, data delays and potential residual seasonality in the eventual estimates. Nevertheless, our full year expectation for 2.2% growth remains unchanged, with a rebound in annualized quarterly growth projected to occur in 2Q, accompanied by a continued gradual deceleration on a yoy basis throughout the year. Doubling down on their dovish stance, US monetary policymakers remained on hold in March, and their forecasts now signal no further rate hikes this year (vs two hikes in the December projection). In line, we have lowered our Fed Funds forecast to no further rate hikes in this cycle. Given current market levels of interest rates and lowered Fed expectations, we have also trimmed our projection for the 10-year yield to 2.7% by year-end.