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Offbeat After 9 years of economic recovery, Fed's anxieties finally fade

21:46  13 june  2018
21:46  13 june  2018 Source:   reuters.com

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However, after five years of weak recovery in which employment growth has barely matched the expansion of the Regardless, the tech boom faded after 2000 and the level of business. 2013. “Behind the Slowdown of Potential GDP,” Economic Trends, Federal Reserve Bank of Cleveland.

When the fall of economic activity finally bottomed out in the second half of 2009, real gross At this point, the Fed ’ s balance sheet stood at just above trillion.8 (Further monetary policy The degree of acceleration of growth in the first two to three years of recovery has varied across post-war business

The Federal Reserve is guiding a U.S. economy that is as close to ideal as it could have dreamed a decade ago, when the darkest days of the recession forced it to take big risks to protect workers, banks and economies around the world from further devastation.

After nine years of steady if uneven recovery, the United States is now growing at a pace topping 4 percent, unemployment is as low as it's been this century, and inflation has safely edged up toward an official target.

While a few items remain on the U.S. central bank's wish list, such as bigger gains in wages and productivity, the main goals of stable prices and full employment are effectively met.

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When the fall of economic activity finally bottomed out in the second half of 2009, real gross At this point, the Fed ’ s balance sheet stood at just above trillion.8 (Further monetary policy The degree of acceleration of growth in the first two to three years of recovery has varied across post-war business

Finally , there is a de novo entrant, which is a newly formed bank. The Fed ’ s policy of keeping the federal funds rate near zero since 2008 has pushed lending rates down, which 1 In order to compare bank size across years , size measures reported in this Economic Brief are relative to 2010 dollars.

The nightmares that long haunted both hawks and doves have not come to pass, even as the Fed held interest rates near zero for years and snapped up some $3.5 trillion in bonds in an extraordinary effort to boost the recovery. Prices did not spike in response to the immense monetary stimulus, nor has the job market cooled since 2015 when the Fed began tightening policy.

The rate hike on Wednesday was the seventh in this cycle and effectively marked a shift to a neutral stance in which the policy rate matches inflation at just under 2 percent, leaving zero "real" accommodation.

"The Fed deserves tremendous credit for steering the economy to calmer waters, supporting what is likely to be the longest expansion in U.S. history while meeting inflation and employment objectives," said Stephen Gallagher, chief U.S. economist at Societe Generale. "Fiscal policy played a role during the crisis, but monetary policy was at the forefront."

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Millions of Americans escaped poverty last year and incomes rose at their biggest gain ever, as the 6- year long economic recovery finally hit home for households. But on Monday, Fed Governor Lael Brainard sounded a very dovish tone in a speech.

In short, five years after the onset of the Great Recession, full economic recovery still remains years and years away. A driving force behind this sluggish growth following the fade of ARRA’ s economic boost is public-sector austerity, particularly on the part of state and local governments.

The current economic expansion is the second-longest in U.S. history, and will set a record if it lasts a bit more than a year longer.

At least on the immediate horizon, little appears to stand in the way given the Trump administration's $1.8-trillion in combined tax cuts and planned government spending. It is not until the stimulus starts to fade in late 2019 to mid-2020 that a recession is likely, according to half of the respondents to a National Association of Business Economics survey.

Fed Governor Lael Brainard, among the most dovish policymakers least anxious to tighten, said on May 31 "the sizable fiscal stimulus that is in train is likely to provide a tailwind to growth in the second half of the year and beyond."

To be sure, the Fed is not inclined to hike rates any more than gradually after years of mostly over-optimistic predictions for inflation and economic growth, and disappointing wage gains of around 2.5 percent annually. Another reason for caution is the White House's threats of more tariffs, including on its closest allies, raising questions over how international trade will affect growth.

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Rebecca Jarvis: Historically, most economic expansions fade after this long. Other postwar expansions range from 12 months for the 1980–81 recovery to 10 years for the long boom of This evidence supports the view of Fed Chair Yellen that the current recovery is not living on borrowed time.

San Francisco Fed President John Williams says America has 'largely attained the recovery we've been after for the past nine years .' Fed official: U. S . economy finally back to normal. by Heather Long @byHeatherLong March 29, 2017: 2:42 PM ET.

But for now, the Atlanta Fed estimates the U.S. economy is roaring at a 4.6 percent rate, a level it reached only twice since the recession. Economists generally expect growth to remain above 3 percent through year end, while Fed policymakers raised their forecast a touch to 2.8 percent on Wednesday.

That is a welcome step-up from the roughly 2-percent growth averaged throughout the recovery, which was plagued by a series of crises abroad and uncertainties at home, delaying the Fed's tightening plans. (For a graphic of the legacy of Fed stimulus, see: http://fingfx.thomsonreuters.com/gfx/rngs/USA-FED/010050VD1YM/index.html )

Job growth has consistently outperformed in recent years, driving unemployment down to 3.8 percent in May, the lowest reading since 2000. Unemployment soared to 10 percent in 2009 and some 8.5 million jobs were lost during the recession that set off a global downturn and financial crisis.

Fast-forward to April of this year when data showed that U.S. job openings jumped to a record high, far outpacing hiring. "This is the most lopsided, mismatched labor market in the nation's history," said Chris Rupkey, chief financial economist at MUFG Union Bank. "The labor market is on fire."

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