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Fed accepts that US potential growth has slowed – BBH

FXStreet (Delhi) – Research Team at BBH, note that the US Fed has accepted the fact that the US potential growth has slowed which can be seen in the Fed's observation that the US economy had been growing above trend.

Key Quotes

“This is what it means when NY Fed President said before the weekend that nonfarm payroll growth of 120-150k is likely sufficient to continue to push the unemployment rate down.”

“The Fed's staff estimate suggests trend growth in the US is about 1.75% through the end of the decade. It means that those warning that the US economy has not achieved that famed "escape velocity" are using a metric that may no longer apply. The strong growth was, in part, made possible by the baby boom generation. Population growth has slowed, and in an increasing number of high and medium income countries, falling.”

“Dudley also acknowledged that an inventory overhang will weigh on growth here in the second half of the year. That instructs us to watch final demand (GDP inventories) and consumption. Consumption is around two-thirds of the economy, and provided consumption remains robust, we should not rule out a December hike.”

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