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“US data has been very strong so far in 2018, buoyed by fiscal stimulus, solid business investment and ongoing labour-market strength,” notes Standard Chartered economist Sonia Meskin.

Key quotes

“We expect this momentum to extend into H2-2018 and 2019. We upgrade our GDP growth forecast for 2018 to 2.9% (2.7% prior), 2019 to 2.6% (2.3%), and our core PCE forecast for 2019 to 2.2% (2.1%). Our core PCE forecast for 2018 remains 2.0%. We see the terminal fed funds target rate (FFTR) at 3.50% (3.00%) in the current business cycle, and forecast further 25bps rate hikes in September 2019 and December 2019.”

“We expect the FOMC to upgrade its median real growth projection at the September meeting, and see a decent chance that the Committee’s median non-accelerating inflation rate of unemployment (NAIRU) estimate will decline too.”

“We expect the FOMC to keep hiking even if core inflation remains benign. Since monetary policy works with a lag, we believe the Committee will be compelled to respond to accelerated growth momentum to keep inflationary pressures and financial stability risks in check.”