The United States economy is expected to continue to grow heading into next year, while inflation will slow down, says a new survey released by the Federal Reserve Bank of Chicago. The growth of the economy is projected to decrease the unemployment rate, according to economists.
Using input from analysts, financial institutions and manufacturers who participated in the annual outlook symposium last week, forecasts allude to borrowing costs gradually rising as the yield one the one-year Treasury bill is estimated to jump to 0.47 percent by the final quarter of 2015 from the current 0.11 percent. They also see the yield on the 10-year Treasury note climbing to three percent at the same time next year.
The Federal Reserve has kept interest rates at historic lows since the financial crisis occurred. With the labor market reportedly improving and potentially stronger economic growth in the new year, many economists have been anticipating a rate hike in the middle of next year – this tune has been somewhat revised in recent weeks.
Fed officials are carefully monitoring inflation, something that the U.S. central bank wants to keep at two percent, which officials say can be achieved in the coming years. However, survey participants believe the consumer price index (CPI) will slip to 1.7 percent in the fourth quarter of 2015.
Oil prices are actually expected to firm throughout next year, despite reports stating the opposite. Fuel prices have dramatically fallen in the last six months as some cities have reported gas prices dipping below $2 per gallon.
NABE sees stronger 2015 for U.S. economy
According to the National Association of Business Economists (NABE), the U.S. gross domestic product in 2015 will shoot up 3.1 percent, while the unemployment rate will tumble to 5.4 percent amid stronger economic growth and an improved labor market.
Inflation, meanwhile, will remain non-existent because of the trend of oil prices next year. The group states it’ll stand at 1.7 percent.
Interest rates will spike in the middle of next year, says most of the NABE economists. However, close to half say it won’t transpire until the third quarter of 2015. John Schoen of CNBC writes: “The NABE also expect rates to rise more slowly—with the federal funds rate hitting 0.75 percent by the end of 2015. That is slightly less than the 0.845 percent forecast in the previous survey in September. Additionally, it trimmed its forecast for yields on 10-year Treasury to 3.2 percent by the end of 2015, down from the 3.5 percent September forecast.”
Although the NABE is enthusiastic regarding next year’s economic growth, economists aren’t as ecstatic about the global economy. Global economic growth is forecast to increase 3.4 percent: China is seen to slowdown to seven percent, Europe will expand by 1.2 percent and Japan will generate a minuscule one percent.
Most surveyed economists blame the lack of growth on “secular stagnation,” and many of these same experts are citing the perpetual debt levels afflicting governments, consumers and companies that were accrued during the financial crisis.
Other reasons for the paucity of growth are the slowdown in technological innovation, demographic adjustments, consumer retractions and excess global production capacities.
Many have questioned the data put forward by the NABE because this was the same organization that pretty much said everything was sound in 2007 and early 2008. Of course, it was quite the opposite and we experienced the greatest economic collapse since the Great Depression.
