Courtesy of Doug Short.
The Fed minutes of its March 17-18 policy meeting released last week was were generally viewed by the popular financial press as showing a split in the FOMC on the timing of a rate hike. The Wall Street Journal has now made available its April survey of economists on key economic indicators. At this point only 19 percent of the 60+ economists see a June rate hike, with a 65-percent majority identifying September as the liftoff date.
With the Fed now off center stage, let’s take a quick look at a couple of items in the April Wall Street Journal survey of economists, starting with where the Federal Reserve is headed with the Fed Funds Rate, which is currently hovering around 0.12 percent.
The April survey was sent to 72 economists, with responses received from 61. Here is a table showing the major response statistics — Low, Median (middle), Average (aka Mean) and High — at six-month intervals from June 2015 to December 2017.
Here is the equivalent table showing the forecasts for the 10-year Treasury Note yield, which closed Friday at 1.96 percent.
Since a picture is worth a thousand words, here’s a short visual essay illustrating the forecast averages for the two series, rounded to one decimal.
Economic indicators this year have been a mixed bag. The most popular headline employment numbers (new nonfarm jobs and the unemployment rate) have generally beaten expectations (although the March new jobs were a bit disappointing). In contrast, Industrial Production had been weak, and Retail Sales have been abysmal. Of course, the weakness can be attributed to another savage winter (a repeat of last year’s meme).
Meanwhile, the economists in the latest WSJ survey have slightly moderated their optimistic view of the US economy. Five of the six 10-year-yield forecasts have been trimmed by 10 bps, and the June 2017 forecast by 20 bps. The Fed Funds Rate forecasts for the comparable timeframes have been trimmed a bit more. Below is the same column chart for the March survey.
What will the future bring? As I’ve said before, I’m reminded of the 1956 Academy Award winner for best song: Que Sera, Sera (Whatever Will Be, Will Be), immortalized by Doris Day. Have retail sales surged with the coming of spring? Will the 10-year Note yield be approaching 5 or 6 percent by the end of 2017 (the highest forecasts in the tables above)? Only time will tell.
