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Wolters Kluwer’s Blue Chip Economic Indicators Panelists Anticipate Hikes in Federal Interest Rates

Fifty-two of the 53 panelists for Wolters Kluwer’s Blue Chip Economic Indicators June issue anticipate that the Federal Reserve’s Open Market Committee (FOMC) will announce a 25 basis point hike in interest rates at the conclusion of its June 12-13 meeting.

The predicted hike – the second to take place this year – would lift the target range for the federal funds rate to 1.75 – 2.00 percent. Just over 60 percent of the panelists forecast that the FOMC will hike interest rates by an additional 50 basis points in the months following the June meeting, bringing the total increase in rates this year to 100 basis points.

In addition to anticipated rate hikes, the Blue Chip consensus forecast of real GDP growth in 2018 increased this month. The increase resulted from expectations of stronger-than-previously predicted growth in the current quarter. Real GDP now is forecast to register year-over-year (y/y) and fourth quarter-over-fourth-quarter (q4/q4) growth of 2.9 percent this year.

“A variety of factors have contributed to increased optimism, as our panelists reacted to a recent series of stronger-than-expected economic reports,” said Randell E. Moore, executive editor of Wolters Kluwer’s Blue Chip Economic Indicators. “Lifting our panelists’ forecasts of economic growth this quarter were better-than-expected monthly readings on consumer spending, construction activity, industrial production, trade, and consumer confidence.”

Other consensus findings from the June issue of Wolters Kluwer’s Blue Chip Economic Indicators survey include:

Real GDP is forecast to grow 3.5 percent in the current quarter, 3.0 percent in Q3 of this year, and 2.8 percent in Q4 of 2018.

In 2019, 26.4 percent of the panelists foresee 50 basis points of tightening by the FOMC, 54.7 percent predict a total of 75 basis points of interest rate increases, and 13.2 percent foresee 100 basis point of tightening.

The Blue Chip consensus forecast of annual and fourth quarter-over-fourth quarter real GDP growth in 2019 was unchanged this month at 2.6 percent and 2.3 percent, respectively.

The unemployment rate is predicted by the consensus to average 3.9 percent this year, the lowest since 1969, and is forecast to average 3.6 percent in 2019.

Trade tensions between the U.S. and its major trading partners remain a top concern of the Blue Chip panelists, but have not yet had much of an effect on their forecasts of economic growth this year.