Country Forecast United States September 2017 Updater

Country Forecast United States September 2017 Updater

  • September 2017 •
  • Report ID: 1698413 •
  • Format: PDF


  • The investigation commissioned by the Department of Justice into potential links between the president, Donald Trump, his advisers and the Russian state will dominate the presidential term and prevent major policy achievements.
  • The Economist Intelligence Unit assesses the risk of Mr Trump being forced from office through impeachment as a result of the investigation as moderate. The loyalty of congressional Republicans remains crucial.
  • We see the 2018 mid-term election to the House of Representatives (the lower house) as too close to call. The favourable electoral calendar means that Republicans remain likely to keep hold of their majority in the Senate (the upper house).
  • Republicans in Congress are keen to pass tax reform legislation. However, the difficulty of making major changes to something as fundamental as tax, combined with Democratic opposition, means that we expect some moderate cuts at best. These are unlikely to be achieved before 2018.
  • We expect the Federal Reserve (Fed, the central bank) to increase its policy interest rate, the Fed Funds rate, once more in 2017, three times in each of 2018 and 2019 and once in 2020. These raises will take the rate to just over 3%.
  • The economy is likely to grow by 2.2% in 2017, led by healthy consumer spending. We are sceptical that Mr Trump will succeed in increasing public spending (and therefore economic growth) significantly. Growth will be similar, at 2.2% a year, in 2018-19. Consumer spending will make a smaller and smaller contribution to growth as interest rates are tightened.
  • We forecast a recession in 2020. As consumer price inflation begins to accelerate, the Fed will signal a more aggressive pace of monetary tightening. This will be too much for the market to bear and the economy will shrink for two consecutive quarters because of declining private consumption and investment. The economy will grow by around 1% in the year owing to interest-rate cuts and some government stimulus, and will recover quickly in 2021.
  • We expect the dollar to rise gradually in 2018-19, supported by tighter monetary policy, reaching US$1.15:EUR1 by end- 2019.


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