UNITED STATES   This week will be, again, all about politics; the impending passage of the Republican tax bill. By most estimates, in its latest version, the bill will cut taxes in 2018 by as much as 1% of GDP, slightly more in 2019. And, contrary to expectations, the expected growth impact of the new legislation was included already in the last set of FOMC forecasts, published last week. FOMC participants’ median forecasts for growth were revised up – by 0.4 percentage points to 2.5% Q4/Q4 for 2018. This is considerably above the Committee’s implied assumption about the economy’s longer-run potential growth rate, at 1.8%. Growth in outer years also increased, remaining until 2020 above the longer-run potential rate. The FOMC statement and Yellen’s remarks at her press conference, however, made it clear that the upswing in the forecasts was due mainly to causes other than the tax cut. As with nearly all other estimates of the growth impact of the new legislation, the FOMC expects the tax cuts to have a small impact on growth, a roughly 0.3% of GDP transitory boost in 2018/19 without longer-term impact on potential output. The implication is that growth in 2018-2020 will be a … Continue reading US + Brazil Financial News (12/18)