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Our Economy in Perspective: Interest Rates, Job Growth, Inflation and Consumption

Our Economy in Perspective: Interest Rates, Job Growth, Inflation and Consumption

| September 07, 2017

There has been a lot of news about the U.S. economy’s growth in recent months, especially as analysts and commentators anticipate the actions of the Federal Reserve and debate the impact of job growth, and the rates of inflation and consumption. 

From Pinnacle Financial Advisors’ perspective: 

The Federal Reserve (our central bank) is expected to take a break from interest rate increases in September but will likely start to shrink its balance sheet. They own about $4.5 trillion in bond-like securities. They will likely let a limited amount of them mature each month, which should have a minimal effect on the economy. 

Payroll gains, or job growth, continue to surge this year and average more than 180,000 new jobs every month since 2015. While our economy grows at a very slow pace, we are experiencing the longest period of continuous employment growth. 

A big question facing the Fed is, “Why is inflation so low?” It is likely that the answer is due to certain one-time events and that we'll see a rebound in inflation to the 2% target level in the near future.

Consumption appears to be experiencing a sustained rebound, which adds a bright note to our outlook. It is likely to stay strong, which bodes well for future economic growth. Consumption makes up more than two-thirds of our GDP (Gross Domestic Product).

Given that we aren't experiencing excesses in the economy, the expectation is that our slow economic growth will continue for the foreseeable future. If you have questions or if you would like to learn more about these perspectives, contact us.