(January 20 – 16:10 ET) – “Supporting maximum sustainable growth is very much the business of monetary policy. But achieving maximum sustainable growth also is about ensuring the
sustainability of an expansion and hence avoiding overheating,” said U.S. Federal Reserve Board Governor Laurence Meyer today .
Meyer made the comments at a meeting ofthe National Economists Club and the Society of Government Economists in Washington, D.C.
Meyer suggested several possible scenarios describing the current state of play and imagined several scenarios that would see the U.S. returning from its position of apparent overcapacity. The outcomes range from a so-called “soft landing” to a “hard landing,” more properly termed a “crash,” with several intermediate possibilities.
He hinted though that the Fed is likely to be cautious and gradual about reining in the economy. “Policymakers will, I expect, be reluctant to undermine macroeconomic performance in the short run in an attempt to unwind a perceived market/sector imbalance that might not be serious or might unwind in a gradual and nondisruptive fashion on its own,” he said.
Meyer noted that several of the problems in the U.S. economy – high debt, low personal savings, and the large current account deficit are not the subjects for the Fed. “Monetary policy, in my view, needs to focus on achieving balance between aggregate supply and aggregate demand.”
“It is not,” he stressed, “the Fed’s goal to rain on everyone’s parade. I view the efforts of the FOMC as precisely focused on balancing these considerations,” said Meyer.
-IE Staff