Wall St.
Photograph by Mario Tama—Getty Images
By Lucinda Shen
April 18, 2016

It’s the billion dollar question: Where is the U.S. economy headed?

Well according to Citigroup, likely not toward meteoric growth. On Friday, Citigroup’s head of North America Economics, William Lee, downgraded the bank’s forecast for the U.S. economy in 2016 through 2017, saying that continued uncertainty has dragged down several key U.S. metrics.

“Our outlook has little potential to be surprised on the upside, but the risks are very evident on the downside,” Lee wrote.

Recent GDP forecasts have suggested “tepid” growth of 0.9% for the first quarter of 2016 stemming from “transitory influences that may be more long-lived than we had expected,” Lee wrote. Citi also noted that forecasts have suggested GDP of 1.7% for the full year, while inflation is expected to stay muted.

Lee attributed the weaker U.S. forecast to “looming uncertainty” as markets question when the Federal Reserve will hike rates, and exacerbated by “many important political events here and abroad scheduled in the next few months.”

Citigroup isn’t the only financial entity to reconsider their call on the U.S. economy. Spurred by the stronger dollar, weaker global outlook, and low oil prices, the IMF also cut the U.S.’s growth forecast from 2.6% to 2.4% earlier this month. Likewise, the Organization for Economic Cooperation and Development downgraded its outlook for the global economy in 2016 earlier this year, saying that the largest impacts would be felt in the U.S. and euro areas.

 

Lee also noted that unemployment rates should still decline, though slowly, to 4.7% by the end of 2016, and 4.5% by the end of 2017.

Considering the state of the economy, the Federal Reserve is likely to hike interest rates just once this year, rather than twice—a number projected by most on the street—he said. Investors should expect the hike in September.

 

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