Where Are Growth, Inflation and Interest Rates Headed? We Asked the Economists

Where Are Growth, Inflation and Interest Rates Headed? We Asked the Economists

The Wall Street Journal’s latest quarterly survey of business and academic economists shows forecasters ratcheting up their expectations for economic growth, inflation and the level of future interest rates.

The following charts show how the economy, and economic forecasts, have evolved over recent months and years. Then, looking at the charts, see if you can guess how economists answered two questions about the relationship between politics, the economy and Federal Reserve policy.

Growth

Most economists thought that the Fed’s aggressive campaign to raise interest rates would do far more to slow the economy than it has.

Growth has outperformed expectations, based on a combination of government spending, increased immigration and resilient consumer demand. Workers are feeling confident enough about their jobs to keep up their shopping habits. Now economists generally don’t think the economy will get anywhere close to a recession over the next year.

Labor market

Job gains have also far exceeded forecasts, possibly owing in part to an immigration-fueled increase in population. Economists still expect a slowdown to come imminently, if only because businesses have exhausted the pool of available workers.

Inflation

In recent years, neither economists nor investors have seriously doubted that the Fed would succeed in bringing inflation down to its 2% target. The question has been what it would take to get there.

Economists, however, modestly increased their 2024 inflation forecasts, even before the latest round of hotter-than-expected price data. (The Journal survey concluded April 9, just before the March reading of the consumer-price index was released.)

Interest rates

For more than two years, economists have steadily lifted their interest-rate forecasts as growth showed little signs of slowing and inflation remained above the Fed’s 2% target.

An exception came in January, when economists forecast steeper rate cuts than they had three months earlier, confident that inflation was nearly conquered. This time, they have gone back to expecting a higher path for rates.

Roughly one-third of respondents in the most recent survey predicted that rates would end the year at 4.75% or higher, implying just two cuts—up from 11% in January.

Survey says…

The Wall Street Journal survey was answered by 69 economists. Not every economist responded to every question.

This article may be updated with future forecast data.

Anthony DeBarros contributed to this article.

Write to Sam Goldfarb at [email protected] and Peter Santilli at [email protected]