According to the economist, the delay due to the dynamic growth of 3.1% year-on-year growth will come in the Q4, if monetary and trade policies become less favorable or more restrictive. But even with sluggish growth, wages will continue to go up with the contraction of the labor market.
“We believe that the Fed should be moderated by growth and have to rise 4X amid 3.25 and 3.50 by the end of the year,” economists said. The Fed’s current forecast includes three interest rate hikes next year and another this year in December.
Economists expect growth to remain above 2% in the first and second quarters, at 2.2% and 2%, respectively, before falling to 1.7 % in the third quarter and 1.5 % in the Q4. The last economic growth was less than 2% in the first quarter of 2017.
Boosted by tax cuts and incentives, economic growth peaked at 4.2% in the second quarter of 2018 and rose 2.5% in the fourth quarter, according to JP Morgan forecasts.
Economists said that monetary policy, which has sustained growth for a decade, will progress into an unbiased stance and that fiscal policy would be valuable in 2019 but less than in 2018. “So far, trade policy was only a minor trouble, but we expect rates to be more visible on growth in 2019,” they wrote. The American consumer has profited from a tax cut of about $120 Billion in 2018, they noted.
Economists said consumers’ balances remained healthy and their expenses should persist to grow, but not as swift as in the past two years. They expect real estate investments, which are insightful to rising rates, fall in 2019, but the housing weakness should be very dissimilar from that observed during the housing bubble burst from 2006 to 2008.