The Federal Reserve is preparing for its next crisis, Reuters reports, which experts hypothesize will begin like the last: an unexpected panic in an under-appreciated corner of the financial sector.
At the annual National Association for Business Economics conference in Boston this week, the Fed painted a picture of the U.S. economy that was almost too good to be true, with inflation seen contained in the near future despite the lowest unemployment rate in 20 years.
But the emphasis in recent Fed speeches and research on avoiding excess leverage and financial market imbalances also risks ignoring the possibility that the next recession may result from runaway inflation.
Robert Gordon, and economist and social sciences professor at Northwestern University and an expert on productivity and economic growth, says continued strong job creation will inevitably boost prices even though few see an immediate threat.
And if the Trump administration nominates the Fed’s former financial-stability guru, Nellie Liang, as a board governor, as expected, efforts to avoid another financial crisis could increase further.
