After back to back quarters of 3% plus growth, the economy is on track to expand by close to 3% annualised in the final quarter of the year as well. Consumption growth is rebounding, with control group retail sales on a clear upward trend in recent months. The economic hit from the hurricanes has faded and turned to a small boost as reconstruction activity has begun. Most indicators suggest that there is now very little spare capacity left in the labour market. And although wage growth has remained muted, broader measures of price pressures are trending upwards. Against that backdrop, the Tax Cuts and Jobs Act that has been passed by Congress looks set to boost inflation by just as much as it boosts economic growth next year. We expect that will prompt the Fed to raise interest rates four times next year, faster than the markets and most Fed officials currently anticipate.
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