MNI POLICY: Phil Fed Survey: Forecasters Lower Infl Outlook

By Jean Yung

     WASHINGTON (MNI) - Economic forecasters' outlook for U.S. inflation and

growth has weakened over the last quarter, according to the latest version of

the Philadelphia Federal Reserve Bank's quarterly Survey of Professional

Forecasters published Friday. 

     The 40 economists surveyed now predict core PCE inflation to be 1.7% this

year, down 0.3 percentage point from the previous estimate, and core CPI to be

2.1%, down 0.2 percentage point. However, over the next 10 years, forecasters

expect headline PCE inflation to average 2% annual rate and headline CPI to

average 2.2%, unchanged from the previous estimate. 

     Inflation in the U.S. consistently fallen short of the Fed's 2% target,

with core PCE inflation slowing to 1.6% in March from 2.0% in December. Fed

officials have said temporary factors may be holding down price levels and they

still believe inflation will rise toward their goal over the medium term.

However, the relatively muted inflationary pressures provide less impetus to

raise interest rates further. 

     The economists surveyed also see real GDP growing slightly slower than they

did previously, at an annual rate of 1.9% this quarter and 2.1% in the third

quarter, down from the previous estimates of 2.4% and 2.2%, respectively.

     On the employment front, the forecasters revised upward their estimates for

job gains in 2019 and 2020. They expect the unemployment rate to average between

3.6% and 3.9% from 2019 to 2022. The projections for 2021 and 2022 are both 0.3

percentage point below those from the last survey.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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