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FED Tolerates US Fiscal Investment Amidst Election Day

(Credit: Scott Olson / Staff) Despite that it is election day for America, FED urges fiscal investments.FED Tolerates US Fiscal Investment Amidst Election Day
November 9
5:12 AM 2016

The United States lawmakers should take advantage of low interest rates by making infrastructure investments and encouraging innovations that boost productivity, a Federal Reserve policymaker said on Tuesday as Americans voted in a presidential election.

Charles Evans, head of the Chicago Fed, waded into the fiscal policy debate just as polls opened, noting that the U.S. central bank would be looking for clarity on the government's direction. An outspoken dove, he said his prediction of 1.75 to 2 percent future economic growth was "informed by some assessment of what policies we are likely to entertain" out of Washington.

The Fed, which is expected to raise rates before year end, has occasionally emerged as an issue in the divisive campaign between Hillary Clinton and Donald Trump. Trump, a Republican, said Fed Chair Janet Yellen was keeping rates low to boost President Barack Obama, a Democrat.

The Fed typically avoids prescribing fiscal policies, though its members have been more strident as their plans for a more aggressive policy tightening fizzled in the face of sub-par growth this year.

Clinton has pledged to unveil a plan to rebuild U.S. infrastructure during her first 100 days, saying this would create new jobs. Trump has proposed increasing spending on the U.S. military and infrastructure but says he would reduce spending on other categories by 1 percent each year.

"There is a real risk if we focus too much on the debt. If you're restricting labor input so that we're not going to get growth. It's just simple arithmetic that's going to be limiting to what our possibilities are," Evans added.

Turning to a possible December rate hike, which he backs, Evans said it remains unclear how the new president's proposals will be pursued once at the White House.

He noted that the Fed's preferred price measure is now up to 1.7 percent, close to a 2-percent target.

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