At the beginning of last year, economists and market investors concurred that the United States economy would grow robustly during the year, thanks to fiscal stimulus from December 2017's tax reform bill. Economists cautioned that the concomitant large federal budget deficit would add to an already tight labour market in raising inflation and interest rates, eventually constraining growth.
But inflation turned out to be lower than expected, due to weaker-than-anticipated wage gains, a collapse in oil prices and a strong dollar lowering the price of imports. Excess demand was also restrained by US companies investing little of their tax-cut windfall profits and repatriated foreign cash holdings in new domestic production, instead distributing them to shareholders, whose savings rose.
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