Economic growth is one of the most important economic indicators, and currently, Federal Reserve chairman Jerome Powell is warning of stalled economic growth going forward.
At a recent congressional hearing, Powell said that inflation is still too high and that lower economic growth could be necessary to bring it down. He noted that wage growth has started to weaken, although low unemployment remains a positive factor for the economy. Powell also noted that there remain risks such as the US-China trade war and Brexit that could put downward pressure on US and global economic growth.
In the short term, the Fed is monitoring inflation closely and has signaled that it could take action if necessary to slow it down in the future. However, in the long term, Powell said that a return to stronger economic growth would more likely to be driven by greater demand, investment and productivity.
This is especially true for the US, where lags in investment can put a damper on growth. Powell noted that while there was good reason to be encouraged by the US economy’s recent performance, it still has a long way to go before reaching outperformance relative to other countries.
On the other hand, one of the main questions regarding the future of the US economy is whether the current rate of economic growth is sustainable. Powell believes that an annual pace of 2% or more is a good target for the US economy over the long term.
Overall, Powell’s statements make it clear that, while the US economy is doing well for now, there is still a lot of uncertainty going forward. The Fed will have to remain vigilant and be ready to respond to threats to the economic growth outlook. For now, it appears that low inflation and slower economic growth might be necessary in order to ensure long-term economic stability.