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Global Macro-Market Outlook

United States Outlook: Calmer Headwinds and Better Growth Prospects

By Prajakta Bhide
Feb 13, 2012 5:00:00 PM | Last Updated

We are revising up our U.S. growth forecast based on an easing of financial stress; signs of momentum in recent data, particularly in the labor market; and a slightly smaller fiscal drag than we had assumed. We still foresee below-potential growth, with downside risks stemming from both domestic and external factors. While the probability of a recession appears to be materially lower, the economy will remain vulnerable to any resumption of financial stress.  Inflation is on track to ease below the Fed’s target by midyear. To shore up the housing market and boost growth, the Fed is expected to increase its MBS holdings. Meanwhile, fiscal policy will remain stagnant until after elections, with a sizeable fiscal drag still in place

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