Fed to remain on side lines as economy heats up

Although trade tensions and the presidential election remain key downside risks, we expect looser financial conditions to drive an acceleration in GDP growth from the second half of next year onwards. We forecast that GDP growth will be 1.9% in 2020 and an above-consensus 2.4% in 2021. Despite that acceleration, the Fed is likely to remain firmly on the side lines, with rates remaining at, or slightly below, current levels for at least several more years.