NEW YORK (Reuters) - Economists trimmed their forecasts for U.S. economic growth in the first quarter but modestly raised their expectations for the balance of 2015 on a brighter outlook for the labor market.
At the same time, forecasters slashed their outlook for inflation, illustrating the challenge ahead for the U.S. Federal Reserve as it pivots toward raising interest rates for the first time since 2006 even as inflation remains well below its target.
Economists see the economy growing at an annual rate of 2.7 percent in the current quarter, according to the Philadelphia Federal Reserve’s quarterly survey of 39 forecasters, released on Friday. In last quarter’s survey, growth for this quarter was forecast at 2.8 percent.
Second-quarter 2015 growth was forecast at 3.0 percent, down from the estimate of 3.1 percent in November’s survey, though full-year growth for 2015 was forecast at 3.2 percent, up from the previous estimate of 3.0 percent.
The annual data for 2015 was the only time period for which growth expectations improved.
The pace of hiring was expected to accelerate in the current quarter compared with previous expectations, with an average rate of monthly nonfarm job growth seen around 269,300 versus a previous forecast of 211,200. Expectations were also revised higher for every other quarter of 2015. In the second quarter, job growth is expected to average 233,800, up from a prior forecast of 195,400.
Hiring should average 252,500 a month for all of 2015, compared with the prior full-year forecast of 212,300.
The jobless rate was expected to be 5.6 percent at the end of the current quarter and 5.5 percent by the end of the second quarter. The November survey had forecast a rate of 5.8 percent by the end of the current quarter.
The most recent official unemployment rate released by the government showed the jobless rate in January at 5.7 percent.
Inflation is expected to stay low, with year-on-year core consumer price inflation, which strips out food and energy costs, averaging 1.3 percent in the first quarter, down from the previous estimate of 1.9 percent. Second-quarter core CPI was seen at 1.7 percent, down from the previous estimate of 1.9 percent.
Looking at the U.S. inflation measure most closely tracked by the Federal Reserve, the core personal consumption expenditures, or PCE, index, forecasters also see muted price pressures. The first-quarter rate was seen at 1.2 percent, down from 1.7 percent in the November survey. The Fed targets two percent for this figure, which came in at 1.3 percent in the most recent report in December.
Editing by Chizu Nomiyama