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Economists Boost US GDP Forecasts, See Fed Rates Higher for Longer
Economists once again upgraded their forecasts for US growth, spending and employment, but also see interest rates remaining higher for longer as above-target inflation persists. The upper boundary of the Federal Reserve’s target range for its benchmark interest rate, currently 5.5%, will fall only to 4% by the end of 2025, according to the latest Bloomberg monthly survey. That’s a half percentage point higher than respondents expected just a month ago. The median projection shows just two quarter-point cuts this year. “We made a substantial revision to our economic outlook,” Tom Simons, a senior economist ... (full story)
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video The U.S. economy made substantial progress in 2023 on the Federal Reserve’s dual mandate of maximizing employment and stabilizing prices. Inflation had one of the largest drops in the last 50 years and did so with solid growth, low unemployment, and no recession. So far in 2024, that progress on inflation has stalled. You never want to make too much of any one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed. I am still hopeful that we will again see a return to improvement on inflation in the months ahead, as our restrictive monetary policy continues to curb inflation pressures and the economy continues returning to pre-pandemic norms. At the end of the day, we will get inflation back to target. I always say that the first rule for data dogs is that when you are uncertain, keep sniffing. Right now, it makes sense to wait and get more clarity before moving. We were at our 2 percent target before Covid, but not because inflation of everything was 2 percent.. Housing was around 3.5 percent, services 2.5 percent, and goods –1 percent. Much of the improvement in inflation last year came from positive supply developments. As the supply chains healed, goods inflation returned basically back to pre-Covid rates. Most of that supply healing is now complete. Part of the supply side benefit last year came from increases in labor supply, in part from immigration and in part from higher participation rates of many groups. The impact of that will likely continue to help the economy this year. While we saw deterioration in services inflation last month, there was surprising improvement over the course of 2023—it remains above pre-Covid trends, but there may be more space for progress. That leaves the main short-run problem as I see it, which is persistently high housing inflation—still much higher than it was pre-pandemic. Looking at market data on rents for new leases, I’d say housing inflation is supposed to have been falling. If it doesn’t, it will be hard to see a smooth path back to our 2 percent inflation goal. As we have seen strong gross domestic product (GDP) and jobs numbers, we need to determine if this is a sign of overheating driving up inflation. But let’s be careful: As I have said before, when there are supply side developments (for example, higher productivity growth, supply chain improvements, or increasing labor force participation or population growth), aggregate numbers are not great measures of overheating. There are crosscurrents at work. Not all the data s post: Goolsbee: Proper Fed Policy Going Forward Will Depend on the Data Goolsbee: Fed’s Current Restrictive MonPol ‘Appropriate’ Goolsbee: ‘Makes Sense to Wait’ to Get More Clarity Before Moving Fed’s Goolsbee Says Progress on US Inflation Has Stalled post: Goolsbee: Still Hopeful for Return to Improvement on Inflation in Months Ahead Goolsbee: Persistently High Housing Inflation’s Main Short-Run Problem Fed’s Goolsbee: We Have to Recalibrate, We Have to Wait and See post: ? GOOLSBEE: THE GOLDEN PATH IS MORE DIFFICULT FOR 2024 ? GOOLSBEE SAY REAL FED FUNDS RATE IS HISTORICALLY QUITE HIGH ? GOOLSBEE: THE POLICY TRADEOFFS ARE HARDER THIS YEAR post: Fed's Goolsbee: Unproductive Speculating On Conditions For Raising, Or Cutting, Rates - Determining Policy Restrictiveness Depends On The Data
The IMF European regional report is out and says: • Soft landing for European economies is in reach but not assured - • High-debt European economies should consolidate fiscal ...
Thank you to the Peterson Institute for the invitation to participate in today’s event focussing on the CEPR volume on monetary policy responses to the post-pandemic inflation1 . In line with the title of this panel I want to provide an update on my assessment of the evidence on what has caused the UK’s inflation2 . This evidence covers the key indicators of inflation and in particular persistence as well as associated analysis and what this implies for the extent to which the risks from persistence are receding. Economic forecasters have had a challenging time over the last few years in forecasting the inflation process, given the series of unprecedented and overlapping shocks which have hit the global economy. These challenges were highlighted in Ben Bernanke’s comprehensive review of the Bank’s approach to, and use of forecasting published last week. A key recommendation of the Bernanke review is that the Bank should make more systematic use of scenarios in framing the outlook for inflation and the implications for monetary policy, in a world characterised by greater uncertainty and significant structural changes. The Bank has committed to implementing all the recommendations of the review. As someone who has used scenarios throughout my career, I think this is the right direction for the Bank to go in. But we should travel with a high degree of humility, given the ongoing uncertainties a post: BOE'S RAMSDEN: THERE ARE LIKELY TO BE BUMPS IN THE DISINFLATION PROCESS FROM ONE MONTH TO THE NEXT. post: BOE'S RAMSDEN: THIS LEAVES THE UK AS LESS OF AN OUTLIER AND MORE OF A LAGGARD IN TERMS OF RECENT INFLATION PERFORMANCE. post: BOE'S RAMSDEN: INFLATION STAYING CLOSE TO THE 2% TARGET OVER THE WHOLE FORECAST PERIOD IS AT LEAST AS LIKELY AS THE FEBRUARY 2024 FORECAST. post: BANK OF ENGLAND MPC MEMBER DAVE RAMSDEN AT PETERSON INSTITUTE PANEL: I HAVE BECOME MORE CONFIDENT THAT THE RISKS OF PERSISTENT INFLATION ARE RECEDING #bankofengland #boe #daveramsden #monetarypolicy #interestrates #inflation #ukeconomy
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Will US data throw more Fed rate cuts off the table? The dollar staged a strong recovery the last couple of weeks, with the bulls being encouraged to initiate long positions as ...
A pause in dollar buying provided some respite for the Pound to Dollar (GBP/USD) exchange rate, but it remains below 1.2500 and settled around 1.2450. According to Scotiabank; ...
A host of economists and monetary policymakers gathered in New York this week for the International Monetary Fund’s Spring Meetings — including numerous decision-makers from the ...
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- Posted: Apr 19, 2024 10:44am
- Submitted by:Category: Fundamental AnalysisComments: 0 / Views: 2,877