“BAC – 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 percent if lawmakers don’t change their current policies.
“Yes, we understand that there’s momentum right now. We’re encouraged by some of the labor 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 percent shock isn’t her team’s baseline policy—it is really something like 2 percent—but added, “There’s the possibility of even larger tightening if you don’t see policy.”
Watch her full interview below:
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