Economic Analysis - BMI Vs. Consensus: Below Consensus On US Growth And LatAm Inflation - NOV 2017

Below consensus on US growth and rates. We are below consensus on US growth in 2018, at 2.1% compared to consensus of 2.3%, largely due to our view that major growth-stimulative policies are unlikely to materialise ( see 'Policy Paralysis And Key Sector Headwinds Point To Disappoint Growth', July 4). This feeds into our view that the Fed will pursue a less aggressive hiking cycle than many analysts and investors expect ( see 'Fed Strikes Uncertain Tone Ahead Of Jackson Hole', August 21), in line with our forecast for an end-2018 policy rate of 1.50%, well below the consensus estimate of 2.10%.

Below consensus on LatAm inflation and interest rates. We are broadly below consensus in our average inflation forecasts for Latin America for 2018, which in turn contributes to our below consensus forecasts for interest rates in the region. After sharper than anticipated declines in inflation in 2017 in most of the region's major economies, we do not expect price growth to rebound substantially in 2018 despite a broad uptick in economic growth. Venezuela remains a notable exception, however. Rapid monetisation of fiscal deficits and an ongoing collapse of the Venezuelan bolivar will see the country remain in hyperinflationary territory in 2018.

Above consensus on Argentin e growth and FX, below consensus on interest rates. We hold a constructive outlook on Argentina in 2018 due to our view that capital inflows and rising export volumes will push real GDP growth higher ( see 'Investment Will Drive Growth Acceleration', August 23. This underpins our forecast for growth to come in at 3.3% next year compared to consensus expectations of 3.0%. Additionally, we expect that robust capital inflows will help see the Argentine peso (ARS) reach ARS16.2/USD by end-2018, compared to the consensus estimate of ARS18.0/USD. Finally, we forecast the country's benchmark interest rate to hit 10.50% by end-2018 compared to consensus of 16.25%, as we expect disinflation will take hold heading into next year ( see 'Rate Cuts To Resume As Expectations Come In', August 14).

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