Economic Commentaries

Entries for February 2015


The Federal Reserve’s open market committee met last week during a rather perilous time for the global economy. Global growth prospects have withered and amidst stagnation and deflation impulses Central Banks worldwide enacted new stimulus measures. The most notable was an aggressive asset purchase program from Europe. There were also reserve additions from China and interest rate cuts from India, Canada, and Denmark to name a few.

In this context the Fed’s FOMC unanimously agreed to remain patient in moving toward policy normalization. This implies no action until at least June. The FOMC acknowledged that inflation is well below its target and is likely to remain so. It also acknowledged the unsettled condition of global markets. But by stating that the U.S. is growing solidly, the FOMC evidently believes the U.S. remains an oasis of prosperity.

Supporting this belief, real GDP growth late last year was at a 2.6% annual rate. For all of 2014 a 2.4% growth rate was achieved which is actually a slight improvement from 2013. This is welcome news but policy should be predicated on what may lie ahead. We see some potential storm clouds.

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