Fannie Mae has downgraded its economic forecast for 2019 and 2020 amid heightened economic uncertainty, lending more weight to predictions that the Federal Reserve may cut interest rates this summer.
Fannie Mae’s Economic and Strategic Research (ESR) Group has powered its projections for US economic growth for 2019 and 2020 to 2.1% and 1.5%, respectively. The ESR Group had previously forecast growth of 2.3% for 2019 and 1.8% for 2020.
The group downgraded its prediction due to weakness in business fixed investment and softening global economic conditions, according to Fannie Mae. It also predicted that the Federal Reserve would cut interest rates by 25 basis points at the September meeting of the Federal Open Market Committee – which is later than many market observers think a cut will happen. Last week, traders in futures markets were giving odds of about 20% that the Fed would cut rates at this week’s meeting – and odds of 70% that there would be at least one interest-rate cut by the bank’s July meeting.