William Dudley, president of the Federal Reserve Bank of New York, offered up an optimistic view of the U.S. economy in 2018, speaking at SIFMA’s U.S. Economic Outlook conference in January.
“Broadly speaking, the prospects for continued economic expansion in 2018 look reasonably bright,” Dudley said in his keynote speech. “The economy is likely to continue to grow at an above-trend pace, which should lead to a tighter labor market and faster wage growth. Under such conditions, I would expect the inflation rate to drift higher toward the FOMC’s two percent long-run objective.”
Dudley expects the U.S. GDP to rise from 2.5 percent to 2.75 percent in 2018 due to robust consumer spending, low unemployment, and a soaring stock market. This represents an increase from his earlier prediction. President Dudley was more cautious about the economic outlook in the longer term.
SIFMA’s Economic Advisory Roundtable expects 2.3 percent GDP in 2017 and 2.5 percent in 2018. The roundtable, which consists of 25 chief U.S. economists from SIFMA member firms, said U.S. fiscal policy and Federal Reserve actions will have the most impact on U.S. economic growth.
“Recession risk is about three things: employment growth, employment growth and employment growth,” roundtable member Michael Gapen of Barclays said.
The panel also discussed the changing of the guard on the Fed Board, with Jerome Powell taking over as chair from Janet Yellen.
“Jay Powell was the continuity candidate,” Stuart Hoffman, senior economic advisor for The PNC Financial Services Group. said. “[His selection as Chairman of the Fed] doesn’t change the outlook on Fed policy, including rate path or path of asset reduction.”
Ethan Harris, head of global economics research for BofA Merrill Lynch Global Research, said that Powell, of all the members of the Fed Board, was closest in philosophy to Yellen, which should make for a smooth transition.