Question

comment on recent trends in the overall health of the economy, especially recent trends in total employment, the unemployment rate, and the possibility of a significant speeding up (or slowing down) in economic activity (from current levels). Given recent trends, what are the near-term prospects for the U.S. economy, and how simulative or restrictive do you expect economic policy (both monetary and fiscal) to be over (say) the next 12 months, and how does the balance of political power between Congress and President Trump figure into your forecast?

Answer 1

US economy has almost recovered from recession. US economy is growing close to 2.5 % which expected to continue over next two years. Further, inflation rate is close to 2 % and unemployment is at natural rate. Unemployment rate is projected to fall to 3.8 % in next year.

Federal reserve operates monetary policy and it has increased federal fund rate to control inflation. Inflation is likely to rise marginally over next two year. Thus, fed would be focussing on controlling inflationary pressures. thus, monetary policy would be restrictive in near future.

But fiscal policy is not likely to be down. Trump has reduced the tax rate to increase growth rate. Trump has promised to achieve the growth target of 4 % over next few years. Hence, he would be pushing for expansionary fiscal policy. But trump would be reducing other spendings such as on environmental mitigations to make balance between contradictory stances president and congress.