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Bank economists are feeling optimistic

By Allison Ross · Bankrate.com
Friday, June 6, 2014
Posted: 5 pm ET

Chief economists from some of the largest banks in the U.S. are not exactly dancing to Pharrell William's "Happy" song, but they are feeling upbeat about where the economy is headed.

"If you picked one word to describe the mood in the room yesterday as we sat down to discuss our forecast and consensus view, it would be optimism," Chris Low, chairman of the American Bankers Association's Economic Advisory Committee, told reporters Friday.

Check out this video of Low:

The committee's outlook suggests that the U.S. will see an unemployment rate of 5.6 percent by the end of 2015 and predicts that inflation-adjusted GDP will achieve roughly 3 percent growth for the remainder of 2014 and into next year.

The group says it expects consumer spending to be "modest but decent" and housing and business investment to pick up.

The group's optimism reflects the optimism in Bankrate's quarterly survey of economists. On average, the economists polled by Bankrate predicted the economy will be growing at an annual rate of 3.05 percent 12 months from now, up from 2.8 percent in Bankrate's similar survey three months ago.

Watching the Fed

The ABA committee says it expects the Federal Reserve to finish the tapering of its bond purchases late this year, with most in agreement it will end in November, Low says.

The group expects the first hike in interest rates to be in the third or fourth quarter of 2015 and that reinvestment of bond proceeds to also end later that year.

Wary about geopolitics

Still, Low says there are some things keeping the group up at night that could derail the economy. First on his list: potential geopolitical forces, including the unrest in Ukraine and the crackdown on credit in China.

"We're also watching the tide of regulation as well," Low says, noting that bank stress tests in Europe are still underway.

Watch this video to hear more from Low on his predictions of the economy. (Spoiler alert: there is unfortunately no dancing in this video.)

To gear up for the Federal Open Market Committee meeting later this month, head to Bankrate's page on all things Fed.

Follow me on Twitter: @allisonsross.

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