When assessing the current situation in the economy, experts consider various aspects and attempt to forecast potential outcomes. Although low inflation rates and the decreasing level of unemployment are desirable by the public and effectively used by politicians in their rhetoric, such circumstances may have negative consequences. The article “Will America’s economy overheat in 2018?” explores the possible implications of the strong and healthy economy of the U.S.
Throughout 2017, the U.S. economy exhibited a stable quarterly growth of more than three percent, and there were several factors which contributed to these positive figures. Compared to the previous years, the median income ceased being stagnant, and in 2015, it increased by five percent. In the last three months of 2017, the economy registered more than one hundred seventy thousand new jobs monthly. Moreover, the recent tax bill passed in the Senate reassured executives and the stock market about the stable growth in the future. Yet, the situation became particularly challenging for the Federal Reserve, which believes that the current trend is unsustainable and fears the prospect of the economy “overheating.” The growing labor market poses a risk of inflation, which the Fed can attempt to combat by increasing interest rates. On the other hand, there is a possibility that a fast rise may provoke a recession, which would be almost impossible to reverse and would prevent the economy from achieving its full potential. Nevertheless, judging by the policymakers’ behavior of the past years, the preferred strategy will be based on pursuing caution.
The article “Will America’s economy overheat in 2018?” attempts to analyze the potential response from regulators to the U.S. economy in 2017. Despite the surge in the number of jobs, increasing median income, and overall stable economic growth, the Federal Reserve is concerned about the sustainability of this trend. Yet, responding to it by raising the interest rates in order to counter inflation may cause a recession damaging the economy.