US political developments and implications for the economic outlook
- Economic appointments: The appointment of Janet Yellen as Secretary of the Treasury is significant. In Yellen, Biden has tapped a pragmatist, a skilled economist, and an experienced financial and regulatory policymaker. These attributes will be needed given the challenges ahead. We discuss how Yellen’s nomination is likely to impact key economic questions like the outlook for more fiscal stimulus and regulatory and trade policy.
- Georgia Senate run-offs: On January 5th, two runoff elections in Georgia will determine which party will control the Senate over the next two years. The outcome will importantly determine prospects for near-term stimulus - fiscal stimulus hopes could flounder on the gridlock of divided government or flourish on either a twin Democratic victory or a surprising resurgence of bipartisan cooperation in Washington.
- Foreign policy: How will the new administration handle tariffs, particularly those on imports from China, and foreign policy more generally?
- 2021 Outlook: Though the US economy has recovered faster than expected through early Q4, lack of additional fiscal stimulus and record covid case growth and hospitalizations point to near-term downside risks. However, the economic outlook has improved beyond the near-term, most importantly driven by positive vaccine developments, which have pulled forward the timing of achieving the pre-crisis level of economic activity.