The Federal Reserve and the National Economic Outlook

The Federal Open Market Committee (FOMC) is one of the central decision making bodies of the Federal Reserve in the United States. Led by the Chair of the Federal Reserve, the FOMC meets eight times a year and is composed of twelve members, who set national monetary policy by consensus. Since 2014, the Chair of the Federal Reserve is Janet Yellen following her nomination by President Barack Obama. Even though Chair Janet Yellen is a democrat and President Donald Trump openly criticized her during 2016, the positive unemployment and inflation indicators that have marked her tenure at the Federal Reserve are creating speculation as to whether or not she will be nominated for a second four-year term. Nevertheless, there is also open speculation as to who might replace her. One of the leading candidates to succeed Chair Janet Yellen is Gary Cohn, the Director of the National Economic Council and Senior Advisor to President Donald Trump. Prior to joining the administration, Mr. Cohn served as President and Chief Operating Officer (COO) of Goldman Sachs between 2006 and 2017. These are just two of a list of four or five names that have been circulating in regards to the nomination for Chair of the Federal Reserve. During the coming months, President Donald Trump will have to put forward a name, which will then have to be approved by the Senate before Chair Janet Yellen’s term expires in February of 2018. In the meantime, the FOMC held its most recent meeting from the 19th to 20th of September and will hold two more meetings this year.

The Federal Reserve and the National Economic Outlook

During the FOMC’s most recent meeting in September, it was decided that the federal funds target interest rate would be maintained at its current range between 1.0% and 1.25%. Similarly, Chair Janet Yellen announced that the national and international macroeconomic conditions have been strengthening gradually as household spending, exports, and business investment in the United States have been rising moderately. However, the Federal Reserve also noted that recent natural disasters throughout jurisdictions such as Texas, Florida, Puerto Rico, and Louisiana will certainly provoke a slowdown in economic growth during the third quarter of the year. Meanwhile, in the national labor market, job creation has averaged 185.000 per month throughout the last several months, which is a positive sign. Simultaneously, inflation remains below its 2.0% target and continues to be the one benchmark that Chair Janet Yellen has not managed to stabilize, even though a lower-than-expected level of inflation is not necessarily a bad indicator. Nevertheless, inflation is expected to rise, at least temporarily, during the next few months because of the disruption in the oil industry supply chain due to recent natural disasters.

The Federal Reserve estimates that real growth in the national gross domestic product (GDP) will be approximately 2.4% during 2017, before stabilizing around 2.0% during 2018 and 2019. Lastly, the Federal Reserve also estimates that the national unemployment rate will hover at little over 4.0% during the next several years.

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