The Economy Today and a Policy Framework for Today and Tomorrow

April 2011
Business Economics;Apr2011, Vol. 46 Issue 2, p83
Academic Journal
The U.S. economy appears to be on track for a sustainable recovery, dominated by private demand, with major components of growth other than residential construction likely to grow at a healthy rate through 2011. Inflation is likely to remain in an acceptable zone, but policymakers must be vigilant concerning inflation expectations. Employment is expected to recover slowly. Within this broad outlook, uncertainty appears to be growing, particularly with the unrest in the Middle East and North Africa. This uncertainty implies that flexibility is essential in either extending Federal Reserve asset purchases or in exiting from its current position. Given that passive unwinding of this position will probably not be feasible and that monetary policy acts with lags, it is important to employ a forward-looking rule to guide action.


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