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Quarterly Economic Outlook – January 2017

Chief Economist

Confidence indicators suggest economic momentum is improving. At the same time, economic policy uncertainty has hit very high levels casting doubts on the sustainability of current optimism.

  • Global economic confidence has been picking up since last summer. Base effects linked to commodity prices are sending inflation higher, breaking the earlier disinflationary trend. Financial markets have been moving in the same direction with stock prices and interest rates seeing positive evolutions in general.
  • There is a growing political awareness that budgetary policy should play a more important role in order to sustain the recovery. That said, talk is still cheap, especially in Europe entering another challenging political year. Fiscal stimulus in the US is subject to a lot of uncertainty in terms of actual implementation, amounts concerned and timing.
  • While financial market volatility is very low, economic policy uncertainty has been increasing to high levels. Risks to the current more positive growth momentum are significant in all too many ways including Trump not being able to live up to his promises, China’s unsustainable credit boom or more Eurozone political instability.

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