Global economic activity has generally been good during the first six months of 2017. Europe’s renewed momentum has been a highlight for the developed world, and China’s steady growth has compensated for faltering elsewhere in emerging markets.

The balance of the year promises to be intriguing, however. Brexit negotiations are underway, and the British economy is on tenterhooks. The U.S. Congress is debating tax policy with a debt ceiling deadline looming. Oil prices are in retreat, challenging the finances of many producers. And China will be holding a key party meeting in the early fall that will set an important tone for economic policy.

Following are our views on how key markets are positioned as we move into the third quarter.

United States
The fundamentals of the U.S economy have provided the Federal Reserve with ample confidence to raise the policy rate three times within a span of seven months. The central bank also announced its plans to commence balance sheet reduction soon, but it did not provide the timeline for this program.

The labor market is the strongest sector of the economy. The latest civilian unemployment rate (4.3%) is well below most estimates of full employment. Other measures of labor market performance are back to levels last seen in 2007. The absence of acceleration in employment compensation at the current stage of the business cycle remains a bit of a puzzle. Sustained economic growth should result in wage pressures in the quarters ahead.

Business and consumer spending are both expected to advance during the rest of the year. The housing sector presents a mixed picture: home sales and construction have been sluggish, but favorable employment conditions are expected to support housing going forward.

The current administration’s plans for a fiscal boost are unlikely to be implemented soon, if ever. Our U.S. forecast continues to assume little in the way of movement on tax reform or infrastructure spending.

Inflation remains below the Federal Reserve’s target, largely due to declines in prices of medical care commodities and telephone services. Slightly higher inflation readings are likely in the quarters ahead, given the projected forward business momentum.