So, from a cyclical perspective, the economy is in reasonably good shape. Over the longer term, however, the U.S. economy faces significant challenges. On the positive side, economic expansions don’t die of old age, and there appear to be few imbalances in the economy that could lead to the current expansion ending. But, in order for this to remain the case, it is important that fiscal policy and monetary policy are well aligned going forward. It is also important that the United States retains sufficient fiscal capacity so that fiscal policy can support the economy when the next cyclical downturn does occur. If fiscal policy can play a greater role in promoting macroeconomic stability, it would likely reduce the need for monetary authorities to take extraordinary actions to support economic activity. There are other structural issues worth noting. In particular, productivity growth has been anemic over the past few years, while income inequality has increased and income mobility remains low. As a consequence, the gains in living standards generated by the current business expansion have been modest compared to previous expansions, and these gains have not been widely shared. Much more could be done both locally and nationally to increase the economy’s potential to perform better for a broader array of our citizens. The outlook for growth and inflation The U.S. economy has been expanding at a moderate rate. Growth has averaged about 1.8 percent this year and seems likely to continue at or slightly above this pace in 2017.
William C Dudley: The US economic outlook and the implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the ABNY (Association for a Better New York) Breakfast, New York City, 5 December 2016. * * * Jason Bram, Andrew Haughwout, Joseph Tracy and Luis Uranga assisted in preparing these remarks. It is a great pleasure to be here and have the opportunity to talk about the U.S. economic outlook. I want to thank the Association for a Better New York (ABNY) for sponsoring today’s event. This is an excellent venue to speak about what we can do to improve our country’s economic performance. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. The U.S. economy—supported by solid gains in household spending—has expanded at a moderate rate in 2016. Job gains have been sturdy, and we have seen some firming in wage growth as the labor market has continued to tighten. Moreover, as the effects of earlier declines in energy prices have dissipated, the overall inflation rate has begun to move up closer to our 2 percent objective. As a consequence, economic conditions are not far from the Federal Reserve’s dual mandate of maximum sustainable employment and price stability. And, I expect that we will make further progress toward these goals in 2017.