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US economic performance is likely to warrant further gradual increases in the federal funds rate. Chair Yellen reiterated her view that "waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession."
As widely expected, the FOMC left its monetary policy unchanged with the Fed funds rate target range maintained at 0.5% to 0.75% at its February meeting. The Fed's balance sheet reinvestment policies were also unchanged.
The issue of populist movements does not stop at elections. In the longer term, it poses the problem of the legitimacy of elites and solutions for reconciling democracy and globalisation. In fact, we have now entered into a political cycle, ie, a point in history where politics has taken over from the economy and is imposing its own rationality. There is no going back: we are seing a transition of both internal and external political equilibrium.
This publication presents the economists' forecasts for interest rates, exchange rates and commodity prices, along with the Crédit Agricole Group's central economic projection.
Clearly, the geopolitical, political and economic risks facing the world are many and multifarious. And it's no easy matter to isolate those that seem most apparent to us. In this respect, a sudden tightening of financial conditions does not yet seem an imminent danger. While 2017 is not looking as if it will be the year of living dangerously, 2018 could well be more fraught.
October nonfarm payrolls rose by 161K, which is likely closer to a sustainable pace of employment generation going forward with the economy near full employment. The October unemployment rate crept down to 4.9% while the participation rate slipped to 62.8%. October average hourly earnings rose 0.4% MoM, and accelerated to a 2.8% annual pace (after revisions to September). We expect earnings to strengthen in the months ahead with the economy close to full employment.
Has the "classic" recovery cycle, whereby growth picks up on the strength of a virtuous circle and investment acts as an accelerator, gone belly up? Despite reduced financial constraints, businesses are watching and waiting and are loath to invest. Global growth is feeling the pain, as is potential growth. Meanwhile, alone at the helm, central banks have fired off all their ammunition.
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