To find the Central banks in the United States and other advanced economies themselves stuck with slow growth in the long term, unless the financial authorities to do something decisive to turn things around, a U.S. Central banker warned on Tuesday.
The dour view may be given as a surprise that the Federal Reserve had increased interest rates earlier this month, and plans to continue doing so after the US economy to keep it from overheating. Rising interest rates often signal optimism about the economic Outlook.
But, San Francisco Federal Reserve President John Williams said on Tuesday, to disappoint while the economic news is encouraging in the short term, over the longer term it is bound.
Aging demographics and the productivity slowdown put brakes on global growth, he said in the speech prepared for delivery to Macquarie University in Sydney, with long-term annual trend growth in the US, the Eurozone, the UK and Canada are now estimated at only 1.5 percent. This is about half the normal pace before the financial crisis.
With the growth so lackluster that the monetary authorities have a harder time managing inflation and maintaining full employment.
This is because the lower growth, the demand for investment is reduced and suppressed in the interest rates, leaving Central banks less room to cut rates to offset an economic shock.
Unless, of fiscal policy, investment in education, training, infrastructure, and research and development to increase production in spite of a slowly growing workforce, “called for the monetary policy, stable prices, well-anchored inflation expectations, and strong macro-economic performance,” Williams said.