The Federal Reserve Board’s annual report on its $1.4 trillion financial stability program for the country has been released today.
While the report shows some progress in the near term, the country is now facing a massive financial crisis and that the Federal Reserve must come up with a way to support businesses, homeowners and retirees.
The board says the country needs to focus on the long-term long-run, which it says means long-standing debt and the long term growth of the economy.
It notes that the economy is now growing at a faster rate than at any time since the Great Depression, and that in the coming years the unemployment rate will fall to 4.4 per cent from 6 per cent.
The Fed has said that the current economic situation and low interest rates will allow the central bank to raise interest rates to stimulate the economy and stimulate the consumer.
The Fed says it will be raising its benchmark federal funds rate from the current 1 per cent to 0.25 per cent over the next year, with a 1-per-cent increase expected by mid-2019.
A strong economy means more money for businesses, more consumer spending, more borrowing, and a more robust housing market.
The board says it expects to see the growth in housing start to slow as the cost of building more housing increases.
What to do next?
The board warns that the recovery will be slower than expected.
It also notes that consumer spending and household spending are already slowing.
If the economy slows to a crawl, the Federal Government is expected to be left with no money to pay for the public services and infrastructure needed to help people stay afloat.
“We have to continue to invest in our infrastructure and in our economy, but we also have to put in place new rules and new ways to provide relief to businesses and households,” said Janet Yellen, the chair of the Federal Open Market Committee.
The Fed also warns that we are heading into a prolonged period of weak economic activity.
“It is hard to overstate the gravity of the current situation,” she said.
But the board warns there is hope.
It says that with a strong recovery in the economy, consumers will continue to save more, and the Fed is also expected to ease monetary policy, which will likely keep the economy from overheating.
So far, the Fed has raised rates only once since the financial crisis, in the spring of 2008, when it was raising rates by 1 per year.
As a result, the board says that the country now faces the risk of a long recession, with unemployment projected to rise to 10 per cent in the second quarter.
And even if things do not get any worse, the bank warns that a recovery will require a massive expansion of public and private investment.
To learn more about how the Federal Deposit Insurance Corporation helps families, businesses and the economy with financial products, go to: www.federalreserve.gov/fdsa/index.htm