Faster Growth and Elevated Inflation Keep Fed on Hold (Update2)

By Courtney Schlisserman and Andy Burt

Nov. 10 (Bloomberg) -- Economic growth in the U.S. will pick up and inflation will remain elevated through early next year, leaving the Federal Reserve little room to reduce interest rates, according to a survey of economists.

Growth will average almost 2.6 percent from October through the first three months of 2007, up from 1.6 percent last quarter, based on the median forecast of 85 economists surveyed by Bloomberg News from Oct. 30 to Nov. 9. Consumer prices will rise 2.4 percent next year, little changed from this year's expected 2.5 percent increase.

The forecasts confirm the view of some Fed policy makers that the expansion may not slow fast enough to cool inflation. Low unemployment, rising incomes and cheaper energy will help consumers sustain the spending that makes up two-thirds of the economy, limiting the damage from the housing slump.