Phil Fed Survey: Economists More Optimistic on Growth

--Inflation Outlook Steady in 2017, 2018

By Jean Yung

     WASHINGTON (MNI) - Economists in the latest Philadelphia Federal Reserve

Bank's quarterly survey marked up their forecasts for growth this year and next

but said they expect inflation toward the Fed's 2% target to slow going forward.

     In the most recent Survey of Professional Forecasters, the 41 surveyed

economists now expect real GDP to rise by 2.6% in the fourth quarter, compared

to 2.3% in the previous quarter's survey. Growth is expected to retreat just a

tad to 2.4% in the first and second quarters of 2018, falling to 2.1% in the

third quarter and ending the year at 2.3%. 

     The surveyed economists still expect inflation to reach the Fed's 2% target

for core PCE by 2019, same as the previous quarter's survey.

     Measured on a fourth-quarter over fourth-quarter basis, the inflation

outlook was overall steady for both the CPI and PCE price index in 2017 and

2018. Core PCE, the Fed's preferred measure of inflation, was marked down a

tenth to an expected 1.4% this year, versus 1.5% in the last survey, but the

forecast for headline PCE stayed the same at 1.5%. Headline CPI is expected to

be slightly stronger at 1.8% forecast from 1.7% in the previous quarter, while

core CPI is expected to be unchanged at 1.7%.

     Inflation has been a sticking point for monetary policymakers as they

consider whether to adjust down their forecasted path for rate hikes this year

and next. However, most officials have said a December move was still

appropriate and markets overwhelmingly expect that to happen.

     "Over the next 10 years, 2017 to 2026, the forecasters expect headline CPI

inflation to average 2.20 percent at an annual rate, down slightly from their

previous estimate of 2.25 percent. The corresponding estimate for 10-year

annual-average PCE inflation is 2.00 percent, unchanged from the previous

estimate three months ago," the survey said.

     When it comes to the other side of the Fed's mandate, maximum employment,

the forecasters revised downward their estimates of job gains to a monthly rate

of 178,000 this year compared to 180,400 previously. Their forecast for 2018

rose to 163,400 from 165,800 monthly in the previous estimate. 

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

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