As 2017 draws toward a close, the US economy is on good footingfor continued above-trend growth in 2018 and beyond. Private sectorfundamentals are mostly solid, the labor market has more than achievedfull employment, and financial conditions are highly supportive of growth.    The primary quandary in the economic picture is where is inflation?We continue to expect real GDP growth of 2.5% for 2017 (Q4/Q4), in linewith the above-consensus forecast we presented around mid-year. A keydevelopment has been a broadening of growth drivers beyond consumerspending, as capex and trade have strengthened in recent quarters. Our2018 forecast is also unchanged at 2.3%, while we raised our 2019projection a tenth to 2.1%. We expect growth to slow significantly in 2020.    With growth above potential over the year ahead, we expect significantfurther labor market tightening. Contrary to the FOMC median andconsensus, which see unemployment leveling off at just above 4%, wehave it falling to 3.5% by early 2019. It should begin to rise again in 2020.    Although inflation should remain low through year-end, our mediumtermview that core inflation should normalize is intact. Supportingthis constructive outlook are positive signals from a variety of leadingindicators including real GDP growth and import prices, among others.    We also discuss a few structural forces that may weigh on inflation.    Our Fed view is unchanged: we expect the next rate increase in December,followed by three hikes in 2018 and four in 2019. This expectation is abovethe Fed’s projections, as above-target inflation and an undershoot ofunemployment below NAIRU force the Fed to raise rates further than themedian FOMC projection envisions. Fed tightening should be sufficientto begin to move unemployment back toward NAIRU by 2020.    The most notable recent Fed development is a near-wholesale transitionin leadership. Jerome Powell's nomination for Chair should represent agood degree of continuity for monetary policy, though consensus may bemore difficult to forge if uncertainty lingers about inflation.    Potential policy changes in Washington represent the greatest uncertaintyto this outlook. Regulatory reform has already given animal spirits andprivate spending a lift. Tax reform is an important wild card, though itfaces significant political challenges. Conversely, potential disruptions totrade policy would be a negative development.

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