The U.S. economy will continue to expand, with growth in 2017 forecast to just above 2 percent, the American Bankers Association Economic Advisory Committee said today. They also said they expect growth in 2018 to slightly accelerate with support from fiscal stimulus.
“The forces that have sustained eight years of progress, such as low interest rates and improvements in labor markets, will continue into the next year,” said EAC Chairman Christopher Probyn, managing director and chief economist at State Street Global Advisors. “Moreover, business and personal tax cuts, along with an increase in infrastructure spending, should boost the economy.”
The EAC — which is made up of 15 chief economists at some of the nation’s largest banks — said they expect job growth to taper progressively through 2018, with unemployment potentially dropping to 4 percent or lower by the end of 2018. They also said in addition to fiscal stimulus, consumer spending and a pickup in business capital spending will sustain growth projections, though Probyn added, “The extent of the improvement in 2018 will depend largely on the size and composition of fiscal stimulus.”
Committee members said they anticipate the Federal Reserve to raise its federal funds target range again in 2017 (the consensus is December) and three times in 2018. A combination of fiscal stimulus, faster growth and accelerating inflation could lead the Fed to move more aggressively, Probyn said.