United States: key takeaways from the week - Nomura

Nomura's key takeaways from last week from the US ...

Key Quotes:

"Special Report: Trump-Russia affair dominates headlines, but impeachment remains unlikely Despite the recent cacophony of revelations around investigations into Russia’s involvement in the US election, we think the potential for President Trump to be impeached or removed from office remains very low. The appointment of Robert Mueller as a Special Counsel is significant and may boost the credibility of the investigation into Russia’s interference in last fall’s election and any connection to the Trump campaign. That said, Mueller’s investigation is likely to take time. Looking ahead, former FBI Director Comey has agreed to testify before the Senate Intelligence Committee sometime after Memorial Day (29 May). That testimony will likely garner much attention. Although politically momentous, we think the investigations and Trump’s possible removal from office would have a limited impact on the economic outlook. 

Special Report: US Budget: Clouds Gathering on the Horizon Although the release of the Trump administration’s proposed FY 2018 budget will have little influence on the final spending package that will eventually pass Congress, it has provided some interesting insights, including details on an infrastructure plan and a desire to curtail federal government spending drastically on a variety of social programs. More important, the administration’s proposed budget highlights two important upcoming deadlines. First, a budget or continuing resolution must be passed by 30 September to keep the government operating beyond then. Second, a new debt ceiling limit or a debt ceiling suspension must be passed by the fall before “extraordinary measures” run their course. 

 Policy Watch: May FOMC Minutes Recap The minutes from the 2-3 May FOMC meeting reinforce our view that the FOMC will raise short-term interest rates in June. This hike will likely come despite recent soft inflation data, and likely be driven, in part, by continued strong performance in the labor market. The minutes also highlight further discussion of future balance sheet policy and noted that the Committee forged a consensus on its operational approach to reducing the balance sheet."