Economic Indicators and the Federal Reserve’s Outlook
The United States has experienced a slow but steady recovery since the 2008 economic crisis. With the aim of maximizing labor participation, maintaining inflation under control, and keeping the economy moving forward, the Federal Open Market Committee (FOMC) meets on a regular basis to discuss economic and monetary policy. The following overview of the US economy considers macroeconomic indicators and offers a parting point for domestic as well as international investors.
Economic Indicators and the Federal Reserve’s Outlook
During June 12 and 13, the Federal Reserve’s Federal Open Market Committee (FOMC), led by its Chair Jerome Powell, held the fourth of eight meetings scheduled for 2018. At the end of this two-day meeting, Chair Powell gave a press conference in which he outlined the national economic outlook and expressed his interest in holding a press conference after every FOMC meeting beginning in January 2019. This means that the Chair of the Federal Reserve will now be offering remarks on a more regular basis than has been traditionally expected. Overall, the Federal Reserve outlined a positive macroeconomic outlook for the United States with favorable jobs creation numbers at an average 180.00 new jobs per month and a record low unemployment rate of approximately 3.8%. Moreover, they also pointed out that, during recent months, household spending and business investment have picked up again, which increases the projection for overall national economic (GDP) growth this year to almost 3.0%. Likewise, the FOMC announced that inflation is increasingly closer to the Federal Reserve’s long-run target of 2.0%, even if higher petroleum prices are currently putting upwards pressure on inflation. Therefore, the FOMC decided to increase its target for the Federal Funds rate by 0.25% to a range between 1.75% and 2.0%.
If economic conditions continue to improve steadily, it is expected that the target interest range will be increased again during the coming months, with the Federal Funds target rate hitting 2.4% by the end of 2018, 3.1% by the end of 2019, and 3.4% by the end of 2020. Similarly, the FOMC expects the Real Gross Domestic Product growth (inflation adjusted GDP) of the United States to reach 2.8% in 2018, 2.4% during 2019, and 2.0% in 2020. In the case of the stock market, the Dow Jones Industrial Average (DJIA) has continued to grow, from 20.660 points on March 22, 2017 to 22.350 points on September 22, 2017 and approximately 25.201 points on June 13, 2018. The next FOMC meeting is scheduled for July 31 and, given the indications presented above, we can expect at least one, if not two, more interest rate increases of 0.25% before the end of 2018. Lastly, in terms of trade, the United States exported a total of US$1.75 trillion worth of goods during 2016 and imported US$2.44 trillion.