AFP/ Winn McNamee
So much for the idea that the Federal Reserve will stand in the way of a Trump economic boom.
President Donald Trump’s promises to cut taxes, increase infrastructure spending, and reduce regulatory burdens on businesses have boosted optimism of everyone from CEOs to small businesses to consumers, sent the financial markets soaring, and boosted job creation. But many skeptics view the post-election moves in sentiment and markets as evidence of a “sugar high” and warned that the Fed might undermine Trump’s attempts to spur faster economic growth.
Fed chair Janet Yellen shot that idea down in her press conference on Wednesday.
“We would certainly welcome stronger economic growth in the context of price stability,” Yellen said. “I certainly urge Congress and the administration to consider policies that would boost productivity growth and raise the economy’s so-called ‘speed limit’ or potential grow. I think those would be welcome changes we would like to see.”
The stock market rallied during the press conference.
The Fed has said that it expects the economy to grow at 2.1% this year and next, with growth falling off to 1.9% the following year. Its long term view is that the economy will grow around 1.8%. Some Fed watchers had speculated that the Fed might view this as the maximum sustainable pace, so that any attempts to drive faster growth would generate unwanted levels of inflation. That, in theory, could lead to the Fed raising rates more quickly, counteracting fiscal stimulus created by tax cuts or infrastructure spending.
Yellen also made it clear that the Fed’s current economic projections do not reflect potential tax cuts or other policy changes. That means that even though the economy is performing at or near where the Fed thinks it can with current fiscal policies, changes to those policies could raise the Fed’s expectations for potential non-inflationary growth.
That is a signal from the Fed to Capitol Hill and the White House to proceed with tax cuts and expansionary policies full speed ahead.
This article was sourced from http://newsactive.net