Changes to the Moody’s Analytics outlook for the U.S. economy were modest in March. Recent economic data point to softer first quarter growth and as a result, we have lowered our first quarter real GDP growth forecast from 2.6% on an annualized basis to 1.7%. Sluggish first quarter growth is partially driven by transitory factors, with strong economic fundamentals giving way to higher growth beginning in the second quarter. Moody’s Analytics expects real GDP to rise 2.4% in 2017 and 2.9% in 2018. 

We expect Federal Reserve officials to raise the target range of the federal funds rate by 25 basis points, to 0.75% to 1%, at their March Federal Open Market Committee meeting. Our federal funds rate forecast in 2018 and 2019 is unchanged as is our estimate for the long-run equilibrium rate.

The March vintage includes a new forecast for the U.S. labor force participation rate. The new path for participation is produced by combining forecasts of the labor force participation rate for 14 age and gender cohorts with forecasts of the civilian noninstitutional working-age population for each cohort. Changes to the forecast were minor until the mid-2020s after which the new participation forecast becomes materially lower than the prior forecast.

Changes in inflation, oil prices, and housing activity were little changed from last month’s forecast.  

A tabular comparison (available to subscribers) of the current and prior vintages is available under Reference Files » Forecast Documentation » U.S. Macro Forecast M/M Comparison.

The only stochastic CCAR variable that received a qualitative overlay this month was the 10-year Treasury rate. It was updated to reflect the most recent historical data to keep the forecast and history consistent.