Inflation Pressures Are Easing but Rate Cut Forecast Remains Uncertain

The New Year is beginning where the old one ended -- with uncertainty about when – or whether – the Federal Reserve will begin cutting interest rates.

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As President-elect Donald Trump prepared to take the oath of office January 20th, the consensus economic forecast was “uncertainty” ─ uncertainty about the policies he will pursue, about the initiatives he will be able to implement, and about the impact they will have on the economy.

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The Federal Reserve is signaling that a December rate hike is almost certain. As widely expected, the Federal Open Market Committee (FOMC) left rates unchanged at its November meeting, reflecting somewhat more concern than the FBI about interfering in the impending election. But the committee’s post-meeting statement indicated that Fed officials see the moon, and sun, and stars aligning nicely to justify the long-awaited increase in the Fed’s benchmark rate, which has remained unchanged since last December.

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‘Tis the season for economic forecasts, and we’ve assembled a few for your information – or your amusement, if you enjoy measuring how far from the bulls-eye many of these projections often land. As a group, economic forecasters have traditionally done better than political pollsters, though, admittedly, that’s not a particularly high bar.

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We’re focusing this month not on the employment report (which was pretty good) but on the tax reform plan crafted by House Republicans, which, housing industry trade groups have concluded, is not good at all for the housing market.