U.S. rates expected to rise in December, but lackluster growth looks likely: Reuters poll
The U.S. economy is expected to grow only modestly into next year, keeping inflation low, but the chances the Federal Reserve will raise interest rates in December are now put at 70 percent, a Reuters poll found.
The poll of nearly 100 economists taken in the past week forecast that annualized quarterly growth accelerated to 2.6 percent in the quarter just ended, up from 1.4 percent in Q2, but will then slow to 2.3 percent in October-December.
For next year, economists forecast the economy would expand 2.0 to 2.1 percent in each quarter. Those expectations are little changed from the past several polls.
Forecasts for 2017 quarterly growth ranged from a low of 0.3 percent to 3.2 percent, versus 1.3 to 3.5 percent in the September poll.
The median probability of a recession in the coming year slipped, however, to 15 percent from 20 percent last month.
China Growth Holds at 6.7%, Backed by Government and Consumers
China’s economic growth remained stable in the third quarter, all but ensuring the government’s full-year growth target will be hit and paving the way for a policy switch toward reining in financial risks.
Gross domestic product rose 6.7 percent in the third quarter from a year earlier, matching the median projection by economists surveyed by Bloomberg, and smack in the middle of the government’s 2016 goal of 6.5 percent to 7 percent growth. Services industries paced the expansion in the first nine months of the year, expanding 7.6 percent.
Releases for September showed the continuing shift in China’s economy toward consumer spending, with retail sales gains outpacing the rise in industrial production. Investment spending continues to be led by the public sector, the figures showed, with subdued private business spending highlighting the problem of high levels of debt.
Fed’s Regional Bank Boards Ramp Up the Call for a Rate Increase
The boards of directors at nine of the 12 regional Federal Reserve banks last month sought an increase in the rate on direct loans from the Fed to 1.25 percent from 1 percent, minutes released by the U.S. central bank Tuesday show.
The Atlanta Fed joined the calls for an increase in the discount rate, pushing the number of regional banks asking for a hike to its highest since December 2015. That month was the last time the Fed raised the federal funds rate, a separate interest rate that is its primary policy tool. Discount rate votes can be viewed as a signal of whether a bank’s president favors a change in the main rate.
Atlanta joined Boston, Philadelphia, Cleveland, Richmond, St. Louis, Kansas City, Dallas, and San Francisco in asking for a discount rate increase. Those banks are home to all four regional presidents who currently hold rotating votes in the policy making Federal Open Market Committee.
Oil price rose on Wednesday
Oil prices rose by around 1 percent on Wednesday, lifted by a report of a drop in U.S. crude inventories and declining production in China, while an upbeat OPEC statement on its planned output cut also supported the market.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at $50.85 per barrel at 0654 GMT, up 56 cents, or 1.1 percent, from their last settlement.
Reference: Bloomberg, Reuters
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