- In the US, protectionism will not affect activity until it actually comes into play! For the time being, the economy is accelerating, buoyed by expectations of tax cuts and increased public expenditure.
- This could have a rather inflationary impact since the economy is already close to its potential, and unemployment is very low.
- We expect inflation to edge up, rising above the official target of 2%, due not only to higher oil prices but also to wage pressures.
- In this case, the Fed would probably speed-up the process of raising key rates, and the bond market is likely to underperform.
- The Euro area recovery appears to be self-sustaining and is resisting potential headwinds (Brexit, “Trump tantrum”).
- Intra-EU trade continues to build, signalling stronger domestic demand.
- The ECB’s “QE” and zero interest rate policy continues to revive credit and money supply growth.
- Inflation has rebounded in the wake of higher oil prices, but the core CPI trend remains very subdued, which argues for the ECB to maintain the status quo in 2017.
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