Fannie Mae Sees 'Unspectacular' Economic Growth

Fannie Mae said economic growth could remain "unspectacular" this year despite a healthier labor market, according to a new report from the mortgage-finance company.

As a result of the lackluster growth and weak inflation, Fannie Mae said it now expects the Federal Reserve to raise interest rates just twice this year instead of three times. That comes despite tightening in the labor market, which is expected to boost wages and drive higher consumer spending.

Also weighing on the U.S. economy this year are a strong U.S. dollar and struggling economies abroad, which Fannie said have hurt manufacturing and exports.

The comments came as Fannie's economic and strategic research group released its February outlook for the economy and housing market.

Fannie expects improvement in the housing market, as home price increases help lift underwater mortgages. Low mortgage rates and easier borrowing are also expected to drive growth in the housing market, while single-family home production is expected to pick up this year.

Fannie and peer Freddie Mac don't make mortgages. They buy them from lenders, wrap the loans into securities and provide guarantees to make investors whole if the loans default.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

February 17, 2016 10:25 ET (15:25 GMT)

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