FED sees limited impact from tax cuts
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FED sees limited impact from tax cuts

As President Donald Trump proclaimed that the U.S. stands “on the verge of a new economic miracle,” the Federal Reserve (FED) sent a more cautious measure. The central bank boosted its 2018 economic forecast from 2.1% to 2.5%, factoring in the President’s tax package on the economy, but left the long-run growth rate of the economy unchanged at 1.8%.

This is lower than the Trump administration’s predicted 3% long-term view of growth – indeed, the President himself suggested that might be too tentative a figure. He said the real increase could be 4% “or more”.  Questioned on Mr. Trump’s comments, Ms. Yellen replied that would be “a challenge.”

graph fed 20171512

Ms. Yellen is positive about the economy. In her statement, she said: “I feel good about the economic outlook. The risks are balanced, and there’s less to lose sleep about now than has been true for quite some time. When we look at other indicators of financial stability risks, there’s nothing flashing red there or possibly even orange. Bitcoin at this time plays a very small role in the payment system.

However, she did express concern over the FED’s continued failure to meet its inflation goal of 2% - and reiterated the central bank’s dedication toward achieving it: “Our understanding of the forces driving inflation is imperfect. We are prepared to adjust monetary policy as needed to achieve our inflation and employment objectives over the medium term.”

Disclosure

The opinions in this article do not reflect those of Dominion Fund Management Limited, and in the instance of any forward-looking statements, these should not be construed as advice.


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