Investing.com – Investors anticipate U.S. economic growth in the second quarter will register its strongest expansion in nearly four years, providing a solid case for the Federal Reserve to move forward with a plan for gradual rate hikes that would include two further increases this year.
The U.S. GDP report for the second quarter will be released Friday at 8:30 AM ET (12:30 GMT) and the consensus predicts growth of . That would be more than twice the 2.0% expansion seen in the first three months of the year and its strongest since the 5.2% reading in the third quarter of 2014.
The range of forecasts is wide with more pessimistic economists pegging it at 3%, while the most optimistic see growth as high as 5.4%. The Federal Reserve Bank of Atlanta cut its projection to 3.8% on Thursday from 4.5% after a weaker-than-expected increase in , while the New York Fed’s last estimate on July 20 pointed to just 2.7%.
But the word from the White House is the number will be to the upside. Fox Business reported this week that U.S. President Donald Trump’s economic advisers are privately telling associates that GDP growth should rise to 4.3% to 4.4%.
“President Trump is even more optimistic, telling one associate he expects second quarter GDP to rise to as much as 4.8% in the second quarter,” according to the report.
Trump publicly insisted via Twitter on Tuesday that the U.S. is “doing great” with the “best financial numbers on the planet,” sparking memories of when the president tweeted about employment numbers head of May’s jobs report.
In any case, stronger-than-expected economic growth would support the Fed’s plans to continue with gradual rate hikes. Fed fund futures currently price in a quarter-point hike for September, with the probability for a second increase in December hovering just above 70%, according to Investing.com’s .
“With a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that — for now — the best way forward is to keep gradually raising the federal funds rate,” Fed Chairman Jerome Powell testified to Congress on July 17.
The only caveat to the Fed’s current outlook is, in Powell’s own words, “the ultimate outcome of current discussions over trade policy”.
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Source: Investing.com
