The central bank, last week, increased the federal funds interest rate by a quarter percentage point, to between 0.75 to 1 percent. This indicates the US economy is strong, but still growing moderately, with vigorous job creation in February and inflation close to the 2 percent objective. Growth predictions remained unchanged at around 2 percent for this year, increasing slightly to 2.1 percent in 2018 and 1.9 percent in 2019.
This contrasts with the campaign promise of the new administration of pushing economic growth over 3 percent, resulting from less regulation, lower taxes and infrastructure spending, which have generated optimism among investors and consumers. However, while the stock market has reached record highs and the index of consumer confidence has increased, it will take a while to approve the legislation required to implement the campaign promises. According to Budget Director Mick Mulvaney, quoted in the Wall Street Journal, the sequence is “health care, tax policy and then infrastructure.” In other words, infrastructure spending will have to wait until 2018.
Therefore, during the press conference held after the Federal Reserve meeting, Chairwoman Janet Yellen said the outlook could change if “a major shift in spending” results from those expectations. She added, the central bank welcomes “stronger economic growth in the context of price stability.”
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media. Former Director, UNECLAC Washington.