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Economist Sees No Change In Fed Policy For 18 Months

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The Federal Reserve's current rate policy could remain unchanged through 2016, an economist at Kennesaw State University in Georgia told Benzinga Thursday.

The central bank touched off a minor stock market rally Tuesday when it backed off from a possible rate hike, although it remained open to a potential move later this year.

Economist Mikhail Melnik expects the Fed's rate policy to remain on hold until mid-to late 2016, with real interest rates continuing "rather low on a more or less permanent basis."

Melnik has sometimes proven an outlier in his forecasting. A year ago Melnik predicted 2014 GDP growth of 1.2 percent, the lowest forecast of 43 economists polled by Bloomberg.

Growth came in for 2014 at 2.4 percent versus a mean Bloomberg forecast of 2.6 percent.

Melnik is now forecasting 2015 U.S. growth of 1.9 percent to 2.5 percent.

The labor market is "likely to cool down a little" according to Melnik, who sees average monthly job gains in 2015 of 200,000.

"Such growth would not contribute much to inflation and help justify the current policy standing for longer," Melnik said.

Higher rates would present the downside risk of a significant housing slowdown, as well as adding significant cost to servicing the national debt, according to Melnik.

Posted-In: Mikhail MelnikEconomics Federal Reserve Exclusives

 

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