It has reinforced prospects for some spontaneous slowing of the economy, introduced a downside risk that had not previously been an important consideration in policy deliberations, and added an additional restraining force on inflation immediately ahead.
The task of the Federal Reserve in the coming year will be importantly shaped by the magnitude of the downdraft from the Asian crisis, how it interacts with the remaining cyclical strength in domestic demand, and the degree to which its effects on import and commodity prices help keep inflation in check.