The Fed raised rates recently keeping their promise of raising the rate in the face of positive economic data. The WSJ forecasts corroborate this rosy picture of the future economy and improving their forecasts from last month.
The consensus GDP growth forecast for the coming four quarters rose by a tenth of a percent or more, and all future unemployment numbers went down. It also looks like the forecast for the turning point in unemployment is being pushed out until mid 2019. The consensus probability of a recession in the next 12 months dropped half a percent to 14.1 percent. Some of the details however do not indicate the same degree of certainty in the future economic position. The expected gap between the federal funds rate at ten year bonds continues to tighten signaling a flattening yield curve, which means the Fed may struggle normalize long rates in time for the next recession. Expected housing starts and housing prices dipped a little, but not enough to be overly concerning. Of course it is no surprise given political turmoil in Saudi Arabia, OPEC extension of production cuts, and now the North Sea pipeline problems, that expected oil prices increased significantly. Expected prices increased by 2 dollars or more through 2018. All in all, there is a strong belief amongst the Fed and professional forecasters that board scope economic futures look robust, but there are still some potential weaknesses.
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