Merrill: U.S. Economy Has Moved Into Fed's Comfort Zone

May 15, 2006
Despite a likely full percentage point upward revision to first-quarter GDP,  to a 5.8% annual rate, the U.S. economy is now in the Federal Reserve's growth "comfort zone," believes David A. Rosenberg, North American economist at Merrill Lynch & Co., New ...

Despite a likely full percentage point upward revision to first-quarter GDP, to a 5.8% annual rate, the U.S. economy is now in the Federal Reserve's growth "comfort zone," believes David A. Rosenberg, North American economist at Merrill Lynch & Co., New York.

Merrill is looking for 3.2% annual rate GDP growth in this quarter, a bit above its initial forecast of 3%. But both numbers are within the 3% to 3.5% growth rate that the financial firm says the Fed is comfortable with.

What does that mean for interest rates? If the economic data continue to show a moderate GDP growth rate, the policy-making Federal Open Market Committee (FMOC) will "stop and smell the roses-at least for a while," responds Merrill.

That could come as early as the next scheduled FOMC meeting, a two-day confab on June 28 and 29.

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