The US government is giving US students a second chance to try to understand the US Federal Reserve’s monetary policy, after the central bank’s July stimulus package was axed amid uncertainty about the pace of the recovery.
The first test of the Fed’s latest stimulus package, which was announced on Tuesday, has been widely criticised for its high-stakes, high-cost approach to trying to restore the US economy to health after two years of near-zero growth.
The US economy has grown at just 2.5 per cent a year in the first half of this year, which is far below the 3.8 per cent annual average growth rate of the global economy.
But a new report released on Thursday by the US Economic Policy Institute, a Washington think tank, said the Fed should have been more cautious in its first stimulus package.
The report said the central banks’ decision to push the economy back towards growth “undermined the economic recovery” and raised questions about how much further the recovery could go.
“The Federal Reserve has been slow to respond to the Feders concerns about a possible soft landing of the economy, and in particular, the effects of fiscal consolidation on the economy,” said the report, entitled US Economic Recovery: Lessons from the 7-Test.
The IMF said in a statement on Friday that the Fed was “significantly underestimating the long-run potential of its actions”.
“The IMF’s new policy view is that the Federal Reserve should have adopted a more cautious approach, especially given the economic uncertainty that was the dominant factor for the Fed to adopt its stimulus plan,” it said.
The Federal Bureau of Statistics has said that growth was 0.9 per cent in the fourth quarter, the fastest pace since the fourth-quarter of 2016.
But analysts at Capital Economics, a New York-based research firm, said it was difficult to see the Fed having any further impact on the economic outlook.
“This is just a short-term boost, and given the strong growth momentum the economy has enjoyed over the past year, it is unlikely that the current expansion will continue for long,” they said.
“A rebound will probably be limited to a couple of quarters, and that would make the stimulus plan’s benefits over the long term less substantial.”
The Fed has yet to publish its quarterly growth report.