Federal Reserve policymakers see a U.S. economy that is rapidly losing momentum....
SAN FRANCISCO/WASHINGTON - Federal Reserve policymakers see a U.S. economy that is rapidly losing momentum. They predict inflation will miss their 2 percent target for yet another year, despite rising wages, and they expect unemployment to increase.
“It feels like the Fed has come to Jesus on this topic,” said University of Oregon economics professor Tim Duy, who believes the abrupt revisions to Fed forecasts show the Fed may have already raised interest rates too far. “The secular stagnation story, some part of it, must in fact be a reality.” If anything, the Fed’s concern has shifted in the other direction, toward inflation remaining so low it undermines business and household expectations about the future, another potential drag on growth if either sector becomes more cautious in spending.To some analysts, the abrupt revisions sound like a warning.
Powell noted risks to his positive outlook include a slowdown in Europe and ongoing trade tensions with China.To others, however, it seemed like confirmation of an inconvenient truth: that global growth may have peaked, leaving countries stuck in slow-growth mode and reliant on fiscal policy to keep from grinding to a halt. In addition, they will have to carry the load of recovery should a recession occur.
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