Fed's Evans: GDP growth rate 'a bit under 2%' in two next years

Economy 9/14/2018, 4:28 PM
Fed's Evans: GDP growth rate 'a bit under 2%' in two next years

President of the Federal Reserve Bank of Chicago Charles Evans estimated on Friday the United States GDP will be "in the neighborhood of 3%," while growth will slow down in 2019 and 2020 and reach a rate of a little under 2%. He singled out the 2017 tax reform as having a "highly uncertain" effect on growth, but stated its "longer-run effects are likely to be relatively small."

Turning to monetary policy, Evans said the strong growth fundamentals and positive inflation outlook indicate the Fed will return to more conventional policymaking. He explained the longer-run neutral level of interest rates is "noticeably lower" than in earlier years. "This means we don’t have the same capacity to cut interest rates in response to adverse economic shocks as we did in the past. And if we run out of such room, then we may again have to turn to unconventional tools such as large-scale asset purchases and forward guidance about the funds rate to provide monetary accommodation," Evans said.

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