News Column

What the Fed Means by Modest Growth

August 6, 2013

Isaac Cohen -- HispanicBusiness.com

government distribution of monetary policy

The statement issued last week at the conclusion of the central bank's policy making committee meeting, known as the Open Market Committee, used the term "modest" instead of "moderate" to describe U.S. economic performance.

Numbers released a few days before the meeting justified the choice of words. The Commerce Department announced that, during this year's second semester, U.S. economic growth reached 1.7 percent, while the first semester revised figure was even less, at 1.1 percent.

Additionally, the employment figures, released after the meeting, confirmed the modest performance. The Labor Department revealed that job creation in July, at 162,000, was less than the 192,000 average monthly job creation of this year's first semester.

Again, the Federal Reserve recognized that "fiscal policy is restraining economic growth." For instance, federal government spending fell 13.9 percent in the last quarter of 2012 and 8.9 percent in this year's first quarter. However, it fell only 1.5 percent between last April and June.

Meanwhile, inflation, at 0.8 percent during the last quarter, was running below the central bank's 2 percent objective. Therefore, the statement by the Open Market Committee expressed concern that inflation below the objective may "pose risks to economic performance."

These figures of modest economic performance with low inflation should decrease the concerns of those who were expecting the Federal Reserve to implement an imminent change of course in monetary policy.

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Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.

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Find out which U.S. Hispanic-owned companies are up and which are down on the 2013 HispanicBusiness Fastest-Growing 100 overview.



Source: HispanicBusiness.com (c) 2013. All rights reserved.


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