Advertising
Advertising
twitter
youtube
facebook
instagram
linkedin
Advertising
Aa
Share
facebook
twitter
linkedin

Table of contents

  1. Upward revisions to near-term growth and Fed view
    1. Bank nervousness points to a contraction in lending

      The US economy has proven to be more resilient than we expected, but the threat of recession lingers on due to lagged effects of rate hikes and tighter lending conditions while the restart of student loan repayments could come as a financial shock for millions of Americans. Inflation is subsiding and this will open the door to looser Fed policy next year.

       

      Upward revisions to near-term growth and Fed view

      We have made major changes to our US forecasts this month, which see us revising up the near-term growth profile while also inserting a July Federal Reserve rate hike. Inflation is still set to slow sharply, but interest rate cuts, which we have long been expecting, are unlikely to happen before the end of this year.

      We expected the economy to have been more impacted by the cumulative 500 basis points of interest rate hikes and a reduction in credit availability than it has been. Certainly, the banking stresses seen in March/April appear to have stabilised thanks to massive support for small and regional banks from the Federal Reserve. Employment creation has been robust, while residential construction has been stronger than expected despite the surge in mortgage rates. The lack of existing homes for sale is keeping prices elevated and is generating demand for new homes.

      Inflation is slowing, but not quickly enough for the Federal Reserve and with the jobs market remaining firm officials are taking no chances. The Fed signalled that June’s decision to leave interest rates on hold should be seen merely as a slowing in the pace of rate hikes rather than an actual “pause”. Consequently, a 25bp July rate looks likely, but we doubt the Fed will carry through with the additional 25bp hike outlined in its latest forecasts.

       

      Bank nervousness points to a contraction in lending

      resilient us economy and the path to looser fed policy grafika numer 1resilient us economy and the path to looser fed policy grafika numer 1

       

       

       

       

      ING Economics

      ING Economics

      INGs global economists and strategists tell you whats happening and is likely to happen in the world of global markets.

      Our analysis and forecasts will help you respond and stay a step ahead in the world of macroeconomics, central banks, FX, commodities and everything else in between. Visit ING.com.

      Follow ING Economics on social media:

      Twitter | LinkedIn


      Advertising
      Advertising