August 2017 WSJ Forecasts

The August WSJ forecasts are out, and it is another mixed bag, though mostly negative.  On the positive side, third and fourth quarter GDP forecasts went up by a tenth of a percent. Forecasts for unemployment through 2019 all went down and payrolls employment increased slightly.

However, annual growth for both 2017 and 2018 ticked down slightly. In addition, all the consensus federal funds rate forecasts decreased, indicating lower expectations for the future job markets. This coincides with lower expectations for inflation through 2019. 

These changes in forecasts reflect the recent low inflation numbers, despite the upbeat employment report. St. Louis Fed President Jim Bullard recently commented on inflation and current monetary policy, which provides a window into the subdued outlook by the WSJ forecasters. In Bullard's view, low commodity (mostly oil) prices have been having the greatest impact on headline inflation, which, he believes, will outweigh any impact of any future improvements in the job market.

If we take that insight as given, the WSJ forecasters are predicting increase in oil prices (and housing prices) over the coming years. Should those increases materialize, the Fed might final realize their two percent target inflation rate.