Sluggish Growth for Rest of 2010: Goldman Economist
The US should expect a notable slowdown in GDP growth, to ½ percent, during the second half of this year, Jan Hatzius, chief US economist at Goldman Sachs , told CNBC Wednesday.
He added that the sluggishness would be more domestically driven—due to the losses of the inventory cycle that is ending and the Federal stimulus money—and that the European sovereign debt crisis will have virtually no impact on the US economy, “maybe a couple of 10ths.”
What was notable about the Fed statement on Wednesday, said Hatzius, is that it acknowledged pockets of trouble hindering economic recovery.
“They took onboard weaker inflation numbers to a pretty significant degree, recognized the drop in energy and commodity prices and also the drop in core inflation,” he added.
"So it’s pretty much consistent with a Federal Reserve that’s on hold for a very long time.”
Tom Porcelli, of RBC Capital Markets, said he didn’t expect a rate hike until at least next year.
“The Fed has basically laid out their game plan,” Porcelli added. “The 'extended period' applies because inflation trends are benign, because inflation expectations are anchored and there’s a lot of resource slack.”
Porcelli said the Fed also needs to acknowledge the high unemployment if the labor market continues to be poor. He also predicted more lean times for the housing market.