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LAST UPDATE:5/19/2018
CQM 051818 CQM 051818

Both CQM and PCA forecasts of real GDP show upward trends since early March, suggesting that the U.S. economy has been steadily expanding. The CQM forecast of real aggregated indexes, particularly real final sales of domestic product, also illustrates the steady growth of the U.S. economy. Headline inflation increased 2.7% in both 2017Q4 and 2018Q1, but it will slow down to grow at an annual rate of less than 1.0% in 2018Q2. However, headline inflation from a year ago is forecasted to increase about 2% in 2018Q2 and Q3, as the Fed had hoped. The market expects a rate hike of 25 basis points with a 95% probability at the June 13 FOMC meeting and an increase of 50 basis points with a 5% probability. Since the Fed seems to have already missed at least one chance for a rate hike, a hike of 50 basis points is not a bad idea considering the current favorable economic condition.


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