US: a slightly stimulative policy mix

With the mid-term elections less than a year away, each side is beginning to hone its weapons to win over the electorate. Household confidence has fallen this year. There are fewer jobs, the cost of living is too high and the ability to access housing is limited. The Democrats have an angle of attack here. On the Republican side, the reply is that the economy will benefit from a strong fiscal stimulus in 2026 thanks to the OBBBA. How do things really stand? This budget plan extends the tax cuts due to expire at the end of 2025 and adds a few others. The effect on demand is seen as positive but transitory. For its part, monetary policy is now broadly neutral, with little room for expansion.