Home / NEWS / Finance / Former Fed Chair Yellen says central bank is being too ‘optimistic’ about US economy

Former Fed Chair Yellen says central bank is being too ‘optimistic’ about US economy

U.S. Federal Self-control Board Chairwoman Janet Yellen

Win McNamee | Getty Images

WASHINGTON — The Federal Reserve’s estimates for long-term money-making growth may be a bit too positive, former Fed Chair Janet Yellen said Friday.

The central bank kept the median gauge for long-term growth at 1.9% earlier this month. An expansion of 1.9% is lackluster compared to growth rates of one-time decades when the economy consistently expanded by at least 3%.

But Yellen thinks the Fed may be overestimating the strength of the U.S. economy with its prediction. “It’s actually an optimistic projection,” she said, citing three factors: demographics, education and productivity.

On demographics, Yellen acclaimed that labor-force growth is approximately a meager 0.5% as population growth has slowed down in recent years. She supplemented that, in the 1980s, labor-force growth got a boost from “an influx of women” joining the force.

“Another reason the 1.9% several is not very high has to do with education. Improvements in average educational attainment of the labor force also boost productive growth,” said Yellen, who was Fed chair between 2014 and 2018. “That’s continuing to rise, but it’s not rising … as rapidly as it old to.”

Yellen also said productivity has remained stubbornly low for years. U.S. labor-force productivity has grown by more than 2% in reasonable four quarters since the start of 2015, data from the Labor Department shows.

The U.S. economy expanded by 2% in the support quarter of this year, boosted by the strongest growth in consumer spending in over four years. However, duty investment contracted by 1%, far more than a previous estimate of 0.6%.

“The economy seems less dynamic than it hand-me-down to be,” Yellen said at an event organized by Georgetown University.

Subscribe to CNBC on YouTube.

Check Also

A new SEC rule could stave off disappointing IPO debuts like Peloton and SmileDirectClub

A new “Test-the-Waters” charge by the Securities and Exchange Commission could help stave off disappointing …

Leave a Reply

Your email address will not be published. Required fields are marked *