Fiscal Stimulus to Boost US Economic Growth, Says OECD

Talking Points:

• Fiscal stimulus set to boost economic growth in United States
• GDP growth under 0.5 and 1 ppt in 2017, 2018 respectively
• Monetary policy set to remain on cautious path near term

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According to a report today from the Organization for Economic Cooperation and Development (OECD), United States GDP is set to enjoy moderate growth as we head toward the end of the year, and set to accelerate as projected fiscal stimulus hits the economy in 2018. The projected fiscal support should lift domestic GDP growth, adding just under one-half and one percentage point in 2017 and 2018 respectively.

With the labor market continuing to perform well and inflation rising, the Federal Reserve is assumed to continue on their gradual rate-hike path, hitting 2.00 percent by the end of 2018. However, monetary policy should remain on a cautious path as certain inflation expectation measures have consistently undershot their targets. This may have the potential to edge down market expectations for hawkish Fed policy near term.