The Bernanke Recovery
Posted at noon on Jan. 22
Ryan Avent looks at the extent to which the strengthening economic recovery is built on the back of the Federal Reserve’s policies, concluding that the “way in which Fed policy evolves this year will tell us a lot, not just about the growth trajectory to expect but about when and why the next downturn might occur.”
“The Fed could wind up triggering a new recession in a few different ways… Fed members will be anxious to more toward a more normal policy regime as soon as economic conditions seem strong enough to withstand it. The longer the expansion goes on, the louder will be calls to end the near-zero-rate policy.”
“If it looks as though a pre-crisis dynamic is developing, in which net capital inflows are supporting a big boom in residential real estate, then the Fed might decide to pull the plug on the expansion sooner.”
