Tags: obama | budget | federal reserve | rate hike

Obama Budget Sees Inflation Slowing as Fed Weighs Rate Increase

Monday, 02 February 2015 01:31 PM


Inflation will slow this year even as economic growth accelerates and unemployment falls, according to projections in President Barack Obama’s fiscal 2016 budget request.

The Consumer Price Index will climb 1.4 percent in 2015 from a year earlier, compared with a 1.7 percent year-over-year increase last year, the forecasts showed. Price gains are seen quickening starting in 2016.

Federal Reserve officials are monitoring the economy for signs of slower inflation as they consider their first interest-rate increase since 2006. A government report showed the Fed’s preferred inflation gauge, personal consumption expenditures, gained 0.7 percent in December from a year earlier, the least since 2009. The PCE has lingered below the central bank’s 2 percent target for 32 months.

“We are still in a situation where the risks are more to the downside than they are to the upside, still in a situation where low-flation or deflation is a greater risk than excessive inflation,” Harvard University professor Lawrence Summers, a former top economic aide to Obama, said in an interview broadcast Sunday on Fox News television.

Unemployment fell to 5.6 percent in December. This year it’s projected to average 5.4 percent before declining to 5.1 percent next year and 4.9 percent in 2017, based on the White House projections. Gross domestic product will expand 3.1 percent from 2014, when GDP rose 2.2 percent from a year earlier.

Despite job market improvement, wage growth has been slow to materialize. That’s hampering businesses’ ability to raise prices in the wake of 2007 to 2009 recession, and a drop in oil costs is also tempering inflation.

Prices measured by the CPI will climb by 1.9 percent in 2016 and 2.1 percent the following year, based on the administration’s projections.

As the economy grows, budget deficits as a share of GDP are projected to narrow. The shortfall, after widening to 3.2 percent this fiscal year from 2.8 percent in 2014, would decline to 2.5 percent in fiscal 2016 and sink to 2.3 percent of GDP the following year, according to the budget request.

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Inflation will slow this year even as economic growth accelerates and unemployment falls, according to projections in President Barack Obama's fiscal 2016 budget request.
obama, budget, federal reserve, rate hike
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2015-31-02
Monday, 02 February 2015 01:31 PM
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