What is in this article?:
- Economists eye moderate growth for US finances in 2012
- Core inflation
- The U.S. economy appears set on a course of moderate growth with relatively low inflation and steady job growth in 2012.
- Inflation-adjusted GDP growth rose to an annualized pace near the long-term potential of 2.5 percent in the latter half of 2011, and will stay on this path throughout 2012.
With moderate economic growth and business investments in productive capacity, the committee predicts core inflation - excluding energy and food - will remain below 2 percent through 2012, just as it did last year. Absent inflationary pressures, the committee expects the Fed to maintain the federal funds rate target at its current level throughout the year. However, spikes in energy prices remain a risk to the committee’s inflation forecast.
Low inflation and Fed policy will keep interest rates down in general, according to the committee. The forecast for 3-month Treasury bills is to hold near zero through this year. The 10-year Treasury note and 30-year mortgage rates are expected to rise to 2.5 percent and 4.3 percent respectively by year-end.
Despite a moderately positive outlook, the group sees several significant downside risks to the U.S. economy, including the European debt crisis, challenges surrounding U.S. fiscal policy and geopolitical risks.
“Europe will likely experience a mild recession this year, which will slow U.S. exports, but will not dramatically affect our economy unless Europe’s financial challenges become much more severe,” Mokrzan added.