Modest Economic Forecast as Fed Gears Up for More Rate Raises

Fannie Mae’s Economic & Strategic Research (ESR) Group kept its latest forecast dependent on the Trump Administration’s policies, projecting modest growth for the economy, as well as some breathing room for the pressured housing market.

Economic Forecast

“Our economic forecast remains unchanged in April as we continue to await details on the new administration’s plans,” said Doug Duncan, chief economist at Fannie Mae, in a statement. “We’re intrigued by the disparity between elevated consumer and business optimism and signs of decelerating first quarter economic growth; however, we expect growth to rebound this quarter as special factors that weighed on growth partially unwind.”

Consumer Confidence

Consumer confidence, which gauges consumers’ perceptions of business and labor market conditions, hit a 16-year high in March, according to The Conference Board. Consumer confidence in housing, specifically, was split between homebuyers and sellers, with sellers expressing more optimism overall.

In terms of monetary policy, the ESR Group expects the Federal Reserve to raise the key interest rate—which has an effect on mortgage rates—two more times in 2017, totaling three raises for the year.

“With the firming of the Fed’s favored measure of inflation [and] reduced labor market slack, and the more hawkish tone of the Federal Open Market Committee at its March meeting, we foresee that the Fed will hike rates two more times this year, in June and September, and announced a change to its reinvestment policy in December,” Duncan said.

Source: Fannie Mae

Reprinted with permission from RISMedia. ©2017. All rights reserved.

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