Bank of America Merrill Lynch senior economist Michelle Meyer appeared on Bloomberg TV with a cautious outlook on both housing and fiscal tightening.
In particular, she said that fiscal tightening is one of the biggest threats to U.S. economic growth, and that fiscal drag could amount to as much as 4 per cent if lawmakers don’t change their current policies.
“Yes, we understand that there’s momentum right now. We’re encouraged by some of the labour market indicators, but we’re not yet convinced. And given the amount of fiscal tightening, we think there will be another uncertainty shock.”
She qualified that a 4 per cent shock isn’t her team’s baseline policy—it is really something like 2 per cent—but added, “There’s the possibility of even larger tightening if you don’t see policy.”
Watch her full interview below: