WASHINGTON (11/17/14)--A number of factors, including falling oil prices, weak global growth and international turmoil, have economists dimming their forecasts for U.S. inflation in the coming months (The Wall Street Journal Nov. 14).
According to a panel of 44 economists surveyed by The Wall Street Journal, annual inflation will end 2014 at 1.6%, a sizeable step back from forecasts only a few months old.
In September, economists had said inflation would climb to 2.1% by the end of the year.
"It's essentially an energy effect," Ian Shepherdson of Pantheon Macroeconomics told The Wall Street Journal. Pantheon projects annual inflation to reach 1.2% in December.
The low cost of fuel, which is lowering the cost of airfares, is pushing down prices across the board.
In the short term, low prices will in turn support a steady expansion, economists on the panel said, and they expect U.S. gross domestic product to climb 2.7% this quarter and 2.8% in the first half of 2015. Further, the unemployment rate will continue to drop.
But any improvements to the overall economy will be "unspectacular," according to The Journal.
"Consumers (could) giddily spend in the fourth quarter, spurred by falling prices at the pump," Sean Snaith of the University of Central Florida, told The Wall Street Journal.
But "consistent growth above 3% (will be) less likely in the face of a strong dollar and ongoing struggles in the housing market," said Diane Swonk, from Mesirow Financial.
Economists polled in the survey also have varying predictions for when the Federal Reserve will begin to raise interest rates.
Ten of the panelists said they worried the Fed will raise rates too soon, while 29, or more than three-quarters of the group, said the Fed would wait too long.
In August, 91% said they worried the Federal Reserve would wait too long to raise rates.