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The economy is only going to get stronger: Mark Zandi

Morgan Korn

The Commerce Department reported Thursday that the economy expanded 3.2% in the fourth-quarter of 2013.

On Wednesday the Federal Reserve decided to further reduce its monthly bond-buying program by $10 billion, a unanimous decision by the Fed's policy-making committee, and an affirmation of an improving economy. 

Starting next month, the Fed will purchase $65 billion worth of securities, down from $75 billion. Additional tapering of the Fed's quantitative easing policy will be done in "measured steps at future meetings," officials said.

Janet Yellen, who takes over for outgoing chairman Ben Bernanke this weekend, will share her views on the economy and QE when she testifies before Congress next month.

Related: Ben Bernanke's legacy on Main Street: "Who?!"

"The FOMC stuck to script," says Mark Zandi, chief economist at Moody's Analytics. "QE3 is on track to end by this fall."

Related: Fed tapering will lead to LOWER, not higher, rates: Dan Alpert

Zandi says the only wrench in this economic recovery could be a reversal in the mending housing market.

"We need to see more home sales, more housing construction," he explains. "Housing is very interest rate sensitive. If rates rise too far too fast, it short-circuits the housing recovery. Then we won't get the economic growth I am anticipating."

Related: Home sellers should expect modest price gains this year says BNP's Coronado

Zandi has a bullish outlook on the U.S. economy: he's forecasting 3% GDP growth this year and 4% growth in 2015.

"The U.S. economy is set to experience much stronger growth as the middle of the decade approaches," he writes in his latest macro outlook. "Businesses are highly profitable and very competitive, households have reduced debt and are saving more, and the banking system is well-capitalized and liquid."

Not everyone shares Zandi's optimism. New York University economist Nouriel Roubini, who earned the nickname "Dr. Doom" for his housing and market crash predictions, argues that economic growth will "disappoint" this year.

"The question is whether we have gotten to sustainable growth that is not based on bubbles," Roubini said last month at a Time Inc. event. "Not yet."

Zandi says better economic growth will also lead to more jobs. He estimates that 3 million new workers will be hired in 2015, up from 2.25 million in 2013 and 2012. That would mean the economy returns to full employment (a federal jobless rate of 5.5% to 6%) by 2016.

"The job market is headed in right direction," Zandi says. "Broadly speaking the economy is performing steadily better."

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