The prospect of a major fiscal stimulus means that we are formally raising our forecasts for real GDP growth, inflation and interest rates. There is still considerable uncertainty surrounding exactly what fiscal, trade and regulatory policies President-elect Donald Trump will pursue in office next year, but we now expect GDP growth to be 2.7% in 2017, compared with a pre-election forecast of 2.0%. We expect the Fed to raise interest rates four times next year which, including a rate hike this December, would leave the fed funds target range at between 1.50% and 1.75% by end-2017.
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