U.S. Economic Outlook

Not so fast for the economy, for inflation and, therefore, for Fed tightening. The Commerce Department’s first guess at Q4:2009 real GDP growth of 5.7% is likely to be the fastest quarterly annualized growth we see for some time.

Not So Fast!

Not so fast for the economy, for inflation and, therefore, for Fed tightening. The Commerce Department’s first guess at Q4:2009 real GDP growth of 5.7% is likely to be the fastest quarterly annualized growth we see for some time. Rather, sequential annualized growth rates over the first three quarters of this year are going to be on the order of less than one-half that of the last year’s fourth quarter. Although one month does not a trend make, consumer inflation in January already shows signs of abating a bit. The dollar is on the ascent against major currencies. It is good to have poor competitors. So, other than a cosmetic increase in the discount rate, which has no current policy significance, the Fed will likely find no pressing need to tighten monetary policy this year. This is the major change in our forecast from last month. We are pushing our projection of the first Fed tightening out from August of this year to January of 2011.

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