Global fiscal policy likely to be eased slightly this year and next

We expect aggregate fiscal policy in advanced economies to be loosened slightly in the coming year or two. President Trump will not succeed in passing the “phenomenal” tax cuts which he has promised, but he is still likely to get agreement on a reasonably substantial package of tax cuts. Meanwhile, governments in the euro-zone are no longer obsessed with austerity and will probably allow fiscal positions to be loosened a bit, even in Italy. With Japan and the UK likely to proceed fairly gradually with austerity, the global fiscal position looks set to be eased a little this year and next.