Lynn Reaser, economic strategist for Bank of America, told CNBC’s “Morning Call” that she believes the Federal Reserve will maintain its focus on inflation when it meets later this week.
She said the economic data are mixed. Employment is strong, new unemployment claims are down and plant utilization is high, but the housing market is a concern.
“I think the Federal Reserve will certainly acknowledge some of the recent soggy data on the economy,” Reaser said Tuesday. “They said recently that inflation seemed to be subsiding, but the latest numbers suggest that inflation is still too hot for their liking. So, I think it might be premature for the Fed to take off its guns on inflation.”
If so, that means no rate cut anytime soon.
Reaser said the Fed’s planned soft landing for the economy “has been deferred” but the central bankers “still believe it’s in place.”
Brian Bethune, U.S. economist for Global Insight, said the Federal Reserve will cut its growth forecast in view of the troubled housing market.
“We’re not seeing firmer economic growth,” Bethune said. “The indicators over past six weeks show growth in the first quarter will be quite slow and suggest a very moderate growth outlook for the rest of this year. So, they’re going to have to water down a little bit the outlook for growth in 2007.”