JP Morgan economists expect economic growth to slow down in 2019, to a pace of 1.9 percent for the year.
The economist say the slow down from a "boomy" 3.1 percent in year-over-year fourth quarter growth will come as fiscal, monetary and trade policy get less supportive or more restrictive.
But even with slower growth, wages will continue to rise as the labor market tightens.
"We see the Fed needing to exert modest restraint on growth, hiking four times to 3.25 to 3.50 by year-end," said the economists. The Fed's current forecast is for three interest rate hikes next year, and one more this year, in December.
The economists expect wage growth to pick up with the continued tightening in the labor market.
They said there is a potential for a profit margin squeeze, as businesses attempt to pass on some cost pressures.
Inflation should grow at a pace of 2.3 percent, as measured by core PCE, and the drop in energy prices and stronger dollar should keep goods inflation in check. But tariffs could create some inflationary pressure and account for 0.2 percnet of the expected acceleration of in inflation in 2019.
On Monday, Goldman Sachs economists also forecast slower growth for the year, with an average 1.75 percent in the second half.
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