The Fed’s own uncertainty about the economy’s underpinnings is more than a decade in the making and traces back to three key developments that have thrown officials for a loop.
A Wall Street Journal series examining the causes and consequences of 2016’s political upheaval
- Election 2016 Is Propelled by the American Economy’s Failed Promises (7/7/16)
- How the China Shock, Deep and Swift, Spurred the Rise of Trump (8/11/16)
First, officials missed signs that a more complex financial system had become vulnerable to financial bubbles, and bubbles had become a growing threat in a low-interest-rate world.
Secondly, they were blinded to a long-running slowdown in the growth of worker productivity, or output per hour of labor, which has limited how fast the economy could grow since 2004.
Thirdly, inflation hasn’t responded to the ups and downs of the job market in the way the Fed expected.
from Stowe Boyd http://www.stoweboyd.com/post/149671667317
