Economic advice for Trump and Powell: First, do no harm
The US economy has become more dynamic over the last few years, and the main goal for the president-elect and the chair of the Federal Reserve should be to keep it that way
IF US economic growth is so good, then why does the Federal Reserve need to cut interest rates?
That was essentially the question put to Fed chair Jerome Powell recently after a speech in Dallas. It would be more constructive to examine the premise – why is growth so good? – and ask what the Fed and others can do to keep it that way.
Real gross domestic product is on track to exceed its pre-pandemic trend for the second straight year. Typically, the Fed might worry that strong growth is a sign that the economy is in danger of overheating, but not this time. Inflation fell. The extra growth largely reflects higher productivity and a faster-growing workforce. Supply-driven growth is not inflationary; to the contrary, it can be crucial for rebalancing supply and demand and lowering inflation.
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