Economic Outlook, January 2016

Jeffrey Lacker

Speech from Federal Reserve Bank of Richmond

Abstract: The U.S. economy has expanded solidly since the Great Recession, fueled especially by a relatively healthy household sector. Consumer spending, residential investment, overall business investment and government spending are likely to contribute to continued GDP growth of about 2.2 percent in the near term. In the next few years, GDP growth is likely to converge to about 1 ¾ percent. Falling energy costs and the rising value of the dollar have held down inflation recently, but inflation is likely to return to 2 percent over the near term. The decline in the natural real interest rate suggests that short-term interest rates are unlikely to reach the levels reached in previous expansions. Still, there are strong reasons to expect real short-term interest rates to rise in the near term. Such increases are a sign of the strength of the U.S. economy.

Date: 2016-01-12
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