§ In his speech to Congress, Mr Trump did not provide a timeline for implementing his stimulus programme. This is in line with our forecast, as we do not expect the initial positive effects of the programme to be felt until the end of 2017.
§ Confidence indicators have improved sharply, leading members of the Fed to adopt a more hawkish tone. We now expect a 25bp rise in the fed funds rate at the Fed’s next meeting on 15 March.
„ Focus on China: The challenge and imperative of financial liberalisation
§ Opening up China’s financial system would diversify the sources of financing available to Chinese residents, restore the link between domestic shares and economic fundamentals and lead to more rigorous corporate governance, which would please international investors.
§ China’s internationalisation requires the yuan to switch to a floating exchange-rate regime. The rise in capital outflows would force Beijing to act quickly. But for internationalisation to be a success, the government will have to first resolve the country’s domestic imbalances and further develop its regulatory framework for the financial markets.
§ China now needs to present a credible reform programme. The path forward that will emerge from the National Congress of the Communist Party this autumn will be crucial.