The fed warned about the risk of prolonged stagnation in the U.S. economy


Powell says he does not consider urgent the rate increase, as it is better to do it “very gradually”. In an interview with the Financial Times he said that the Outlook for the U.S. economy threaten to adverse global trends, and inflation remains below the planned level.

As the FT notes, that the U.S. economy could face a long period of stagnation, which will be characterized by extremely weak economic growth and low interest rates, said earlier the former head of the U.S. Treasury Larry summers. Powell said that such a development relate to its “basic” expectations, but he believes such a possibility all the more likely.

The banker admitted that the prospect of weak growth for an extended period of time concerned him now more than before. He added that the base rate, the fed will have to keep at a lower level than he first thought.

Powell said that among the leadership of the Federal reserve system (FRS) observed the downward trend of long-term forecasts on the bet level, and this process is not over. In his opinion, the median rating of 3% may be lower.

FT talked with Powell on Thursday, the day before the publication of data on the labor market, which has surpassed forecasts of experts. The banker noted that to raise the bet he wanted to see significant growth in employment and demand, inflation approaching 2%, and the absence of explicit events carrying risks on a global scale.

Powell since 2012, is on the Board of governors, which consists of seven people. Managers are appointed by the President and approved by the Senate. The term of office of Powell expires in 2028. It is included in the operations Committee on the open market, claiming the basic rate and has a reputation as a balanced centrist, writes the FT.

In December 2015 the fed for the first time in ten years raised the rate, lifting it 25 basis points to a range of 0.25-0.5%. Since then, it remains unchanged. According to Bloomberg, made at the end of June, the rate increase will take place no earlier than 2018.

According to Powell, it is hard to decide on raising rates “in a world where it reduces global demand remains weak.” He noted that the rate hike led to a significant strengthening of the dollar over the past two years, which in turn became a constraint on economic growth.