Fed puts a positive spin on a tepid economic outlook GlobeBusiness
that give the central bank precious little room for conventional policy easing when the next downturn arrives.
Powell delivered his message on Wednesday as the Fed signalled it is likely finished with the interest rate increases it started back in 2015, and hinted that should the outlook worsen, a rate cut may be next. “I think we are bracing for another shoe to drop,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
“Even once this episode is past, what do things look like? In the Fed’s view it is a world of sub-2 per cent growth” over the long run, said Nathan Sheets, chief economist at PGIM Fixed Income and a former U.S. Treasury official. “By U.S. historical standards, it is not great.” Originally skeptical of the secular stagnation argument that low growth in developed nations is hard-wired into the long-term outlook by aging populations that over-save, he said he now views that as the “more likely” state of affairs.
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