Fed’s Williams Offers Dovish Growth Assessment of Advanced Economies

Central banks in the United States and other advanced economies will find themselves stuck with slow growth over the longterm unless fiscal authorities do something decisive to turn things around, a U.S. central banker warned Tuesday.

That dour view may come as a surprise given that the Federal Reserve raised interest rates earlier this month and plans to continue to do so gradually to keep the U.S. economy from overheating. Rising interest rates often signal optimism about economic prospects.

But, San Francisco Federal Reserve President John Williams said Tuesday, while the economic news is encouraging in the short-term, over the longer run it is bound to disappoint.

Aging demographics and a productivity slowdown are putting the brakes on global growth, he said in remarks prepared for delivery to Macquarie University in Sydney, with long-run yearly trend growth in the U.S., the euro area, the U.K. and Canada now estimated at just 1.5 percent. That is about half the normal pace before the financial crisis.

With growth so lackluster, monetary policymakers will have a harder time managing inflation and maintaining full employment.

via Reuters

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