For the first time since 2010, the world economy is outperforming most predictions — a trend that Goldman Sachs Research economists Jan Hatzius and Jari Stehn see not only continuing but amplifying in 2018.
Their global outlook (available below) predicts 4% GDP growth next year, a forecast notably above consensus expectations and supported by still-easy financial conditions and fiscal policy. Stubbornly low core inflation should also tick up in advanced economies as their labor markets continue to strengthen and the drag from low commodity and import prices unwinds. They look for the Fed to lean against this strength by tightening considerably more than what’s priced by the market, attempting to prevent a bigger economic overheating and recession down the road. Click here to read abridged report.