24 Mar 2015
US economy can grow faster before inflation becomes a problem – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura explain that FOMC lowering its unemployment forecasts implies a more favourable trade-off between employment and inflation.
Key Quotes
“FOMC’s forecasts suggest that the Committee’s assessment of the supply-side of the US economy is changing. Such changes also have implications for the path of interest rates.”
“The central tendency of the FOMC’s long-term forecast for the unemployment rate fell from 5.2-5.5% in December, to 5.0-5.2% last week. This change probably reflects the fact that the unemployment rate has fallen steadily in recent quarters with only modest evidence of an increase in inflationary pressures.”
“A lower estimate of the “natural rate” of unemployment implies a more favorable trade-off between employment and inflation.”
“In other words, the economy can grow faster and longer before inflation becomes a problem. This would warrant a lower path for short-term interest rates.”
Key Quotes
“FOMC’s forecasts suggest that the Committee’s assessment of the supply-side of the US economy is changing. Such changes also have implications for the path of interest rates.”
“The central tendency of the FOMC’s long-term forecast for the unemployment rate fell from 5.2-5.5% in December, to 5.0-5.2% last week. This change probably reflects the fact that the unemployment rate has fallen steadily in recent quarters with only modest evidence of an increase in inflationary pressures.”
“A lower estimate of the “natural rate” of unemployment implies a more favorable trade-off between employment and inflation.”
“In other words, the economy can grow faster and longer before inflation becomes a problem. This would warrant a lower path for short-term interest rates.”