Assessing the US economy at mid-year

• The US economy is on track to grow by nearly 7% this year
• Strong labour market recovery, a hot housing market, gains in consumption
and investment demand, and sustained public sector support are key features of the ongoing recovery
• Inflation pressures have picked up, both from the supply and demand side. We expect average core PCE inflation of nearly 3% this year and around 2.5% next. Still these outcomes won’t make the Fed the Fed particularly hawkish
• Economics normalisation will bring back focus on debt management.
• More than 100% of GDP worth of public debt needs to be serviced and
refinanced at low rates. There is also demand for higher wages and public
support schemes
• Meeting these demands while maintaining a credible price and debt management strategy would be exceptionally challenging