Oh, no. Alan has been into the lotus flowers again.
The Federal Reserve expects above-average growth, declining unemployment and low inflation through the end of the year and into 2005 - an outlook some economists consider too rosy.Even though Alan & Co. need to be tied under the benches of the USS Federal Reserve, the General has found economists who have rowed away from the country of the lotus-eaters. Bear Stearns is predicting 2004:II growth of 4.1% or lower. Merrill Lynch chief North American economist David Rosenberg thinks that the first quarter's 3.9% growth may be the year's high point. I'm on the lookout for anyone else coming to their senses before the second quarter GDP figures are released on Friday.
"It's doable on the growth side ... they are too optimistic on the inflation front," says Brian Wesbury of Griffin Kubik Stephens and Thompson, a Chicago investment-banking firm. "They sort of have us obtaining nirvana again like the 1990s boom."
In its semiannual economic report to Congress last week, the Fed predicted growth in 2004 to average 4.5% to 4.75%. The core inflation rate, which doesn't include food and energy prices, will top out at 1.75% to 2%, and unemployment - now 5.6% - will average 5.25% to 5.5% in the fourth quarter, falling to as low as 5% at the end of 2005.