Surging prices begin to weigh on confidence

Negotiations over a bipartisan compromise on infrastructure spending continued this week, but the Republicans and Democrats are still so far apart in their offers that it is only a matter of time before these talks collapse. The Democrats next best option is to try passing a combined infrastructure and social welfare spending bill via reconciliation when the next fiscal year begins this October. Even if the centrist Democratic Senators are willing to support such a bill, which remains unclear, the spending would be largely paid for via higher taxes on corporates, capital gains and high-income earners. As the impact would be close to revenue neutral, we won’t be rushing to revise our real GDP growth or inflation forecasts.