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Press Release

Growth Forecast Unchanged Ahead of Expected Rate Hike

March 15, 2017

 

Matthew Classick

202-752-3662

WASHINGTON, DC – Growth expectations for 2017 remain subject to both upside and downside risks from potential policy changes as the Federal Reserve considers raising interest rates for the second time in three months, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s March 2017 Economic and Housing Outlook. Full-year economic growth is projected at 2.0 percent, unchanged from last month, while the forecast for current quarter growth is down slightly due to weaker-than-expected consumer spending data. Still, general business and economic sentiment remain strong despite policy uncertainty. Thanks to rising household net worth and healthy jobs data, consumer spending should remain the primary driver of growth. A pickup in the Fed’s favored measure of inflation in January supported several Fed officials’ hawkish speeches, which led the market to fully price in a rate hike at the conclusion of the Fed meeting later today. The ESR Group expects today’s target rate increase to be followed by two additional hikes in the second half of the year. Home sales should continue to improve this year despite affordability challenges, including continued strong home price appreciation due to scarce inventory.

“Our economic forecast remains in a conservative holding pattern as we await word on the particulars of the new Administration’s plans for fiscal stimulus,” said Fannie Mae Chief Economist Doug Duncan. “In the meantime, economic sentiment from most industry stakeholders continues to reach new heights: consumers, as demonstrated by our National Housing Survey, are more positive than at any time since the survey’s inception in 2010 about the direction of the economy, while homebuilders’ optimism remains near an eleven-year high.”

“Tight inventory remains a boon to home prices and Americans’ net worth, but it also continues to price out many would-be first-time homebuyers. However, our research suggests that aging millennials, now boasting higher real wages, are beginning to narrow the homeownership attainment gap,” said Duncan.

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full March 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

 

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

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