However, as these temporary factors dissipate, economic slack declines further and inflation expectations remain stable, inflation should slowly move up toward the Federal Open Market Committee’s longer-run objective of 2 percent. Using data from the National Income and Product Accounts, this expansion so far has exhibited unusual features compared to previous long expansions. Most notably, the pace of growth during the early years of this expansion was well below that of the early years in previous long cycles (Table 1). Among the factors for the slower growth were unusually low contributions from residential investment and from nondurables and services consumption. In contrast, the contribution from durables consumption, particularly for motor vehicles, was similar to that observed in previous expansions. Even though real GDP growth has picked up some in the past two years, these patterns are still evident (Table 2). The slow growth during the current expansion, what we might call the long shallow recovery, is likely a result of a confluence of many factors including constrained monetary and fiscal policies, demographic factors and economic and financial developments abroad. Today, I’d like to consider developments in credit markets in the context of this shallow recovery. Credit availability is a crucial ingredient in any advanced economy’s recipe for economic growth because credit can support investment in productive enterprises and can smooth household spending from fluctuations in income. Credit is the means through which financial assets accumulated by savers can earn returns by being put to productive uses.
James McAndrews: Credit growth and economic activity after the Great Recession Remarks by Mr James McAndrews, Executive Vice President and Director of Research of the Federal Reserve Bank of New York, at the Economic Press Briefing on Student Loans, Federal Reserve Bank of New York, New York City, 16 February 2015. *  *  *  Accompanying tables and figures can be found at the end of the speech. Good morning and let me welcome you to our press briefing focusing on developments in the student loan market. My remarks will concentrate on the role of credit markets more generally during this economic expansion. As a reminder, these remarks reflect my own views, and not those of the Federal Reserve Bank of New York or of the Federal Reserve System. First, let me say a few words on the current economic outlook. Real GDP grew 2.4 percent over the course of 2014. As New York Fed President Dudley noted earlier this month, despite what appears to be a soft first quarter, we expect that real GDP growth will continue over the next couple of years at a similar rate, supported by solid underlying fundamentals and accommodative financial conditions. Unemployment should continue to decline and approach 5 percent by late this year. Because of the recent sharp fall in oil prices and the appreciation of the dollar, inflation will be very low over the coming months.