As the current fiscal tightening fades and the external environment improves, we expect US GDP growth to accelerate from 1.5% this year to 2.5% in 2014 and 3.0%. Despite the recent rise in long-term interest rates, the housing recovery should continue, providing indirect support to consumption through the impact on households' wealth and direct support to residential investment. Employment growth may pick-up modestly but, as some of those who gave up looking for work return to the labour force, we anticipate that the unemployment rate will continue to decline at a gradual pace. Under those circumstances, we would expect the Fed to adopt a cautious approach, concluding its asset purchases in mid-2014 and not raising rates until early 2015.
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