US tax cuts bad idea now but will boost growth

A Reuters poll of economists showed that the US government was wrong to cut taxes at this stage of the business cycle given the economy is near full employment.

However, the tax cut is expected to lift growth this year and back the case for further rate hikes.

Reuters conducted the poll of over 100 economists taken Feb. 8-14.

Key Findings:

“The 2018 growth outlook was once again upgraded in the latest poll.

The expectations for when the Fed’s preferred inflation measure reaches its target was pushed back a quarter to early next year.

The poll forecast the Fed’s preferred inflation gauge - core PCE prices - would average below the 2 percent target in each quarter this year.

The unemployment rate is at a 17-year low of 4.1 percent, and many economists are warning that more fiscal stimulus right now is not what the economy needs.

The consensus view in the poll was for the federal funds rate to go up in March by 25 basis points to 1.50-1.75 percent.

The Fed is then expected to hike in the second and third quarters, taking rates to 2.00-2.25 percent by end-2018.”

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