New York Fed Sees Stronger 2014 for Growth and Even Inflation

For 2013, the prediction is actually a tad lower due to a fiscal drag. This new level of growth for the broader U.S. economy is 2.5% rather than the 3.0% or so previously expected. The big gain is now being projected at 3.25% for 2014 and perhaps more important is that they now expect that inflation could tick back up toward that 2.0% target in 2014.

The good news here is that this eliminates the deflation camp, and if underlying strength is going to remain on its own, then perhaps the tapering of bond purchases can come sooner rather than later.

We would not hang too much weight on any single regional Fed report, but we would also point out that this is the New York Fed branch and they tend to be a bit closer to the money than other regional Fed districts.

Stocks have managed to recover much of their losses, but the 10-year Treasury note is still yielding above the two-handle at 2.03% and the 30-year Treasury long bond is close to 3.21% on last look.