San Francisco Fed Sticks to Rosy Forecast Despite Recent Weakness – Real Time Economics

A wobbly start to the year is not deterring economists at the Federal Reserve Bank of San Francisco from a fairly upbeat growth outlook for 2015.

“With winter behind us, we expect above-trend growth to resume in the second quarter and continue for the rest of 2015,” writes Mary Daly, senior vice president and associate director of research at the San Francisco Fed, in a recent research note.

“Accommodative monetary policy along with ongoing improvements in credit market conditions, asset values, and household incomes related to the strong labor market all are expected to help sustain this solid growth.”

Many economists have cut back their first quarter growth forecasts to below 2%, with some attributing much of the unexpected weakness to another unusually harsh winter.

Ms. Daly echoed that view. “Much of the weakness can be traced back to severe winter weather in the Midwest and East Coast that snarled transportation networks, idled construction sites, and kept shoppers at home,” she said.

Fed officials have generally become less optimistic about U.S. growth prospects in recent weeks. As recently as March 1, Ms. Daly’s boss, San Francisco Fed President John Williams, was sticking to his estimate that U.S. gross domestic product would finally hit a 3% annual growth rate for first time in this recovery. By March 23, he had revised that forecast down to 2.5%.

At their March policy meeting, Fed officials downgraded their 2015 economic growth forecast to 2.3%-2.7%, from their estimate in December of 2.6-3.0%.  They will next update their forecasts at their meeting in June.

Related Reading:

Fed’s Dudley: Hopeful for 2015 Rate Increase, but Action Depends on Economy

Fed Shies Away From June Rate Hike

Fed’s Williams: Midyear Will Be Time to Start Rate Increase Debate

Winter Snow Weighs on First Quarter GDP

 


 


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24 April 2015 | 10:00 am – Source: blogs.wsj.com

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