Forecasters predict steady job growth as Fed tries to contain inflation

With professional forecasters now seeing the US economy grow more slowly in the first quarter, many believe the Federal Reserve can keep inflation under control while keeping the economy on track. a survey released on Friday.

Economists still expect strong GDP growth for the year, supported by a strong jobs recovery, according to a survey of forecasters at the Philadelphia Federal Reserve. They also expect inflation to be stable in the long term, according to the survey.

Fed officials are under pressure to act more aggressively to rein in price increases after a report on Thursday showed inflation last month rose at its fastest pace in 40 years. But not all policymakers believe the Fed should start raising rates with half a percentage point increase, with some saying they want to speed up or slow rate hikes depending on what happens. What happens to inflation?
Professional forecasters say they now expect the US economy to grow 1.8% in the first quarter, down from 3.9% growth expected in November, according to the survey Fed. But they still see the economy growing 3.7% for the year, down slightly from previous expectations.

They also see the US labor market adding about 430,000 jobs a month this year, a pace that could help close the pandemic-induced employment gap within six months. As for inflation, forecasters say they expect price increases to fade over the long term highs seen today. Forecasters now expect the Personal Consumption (PCE) price index to average 4.7% in the first quarter of this year, before falling to 3% in second quarter. They estimate that PCE will average 2.2% annually over the next decade, slightly above the Fed’s 2% target.

A separate consumer survey from the University of Michigan shows that inflation is weighing on consumer sentiment, which fell to its lowest level in more than a decade in early February. The consumer survey’s one-year inflation expectations rose to 5.0%, the highest since July 2008. Its 5- to 10-year inflation outlook remained steady at a high level. 1.3.1% within 11 years.