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The American economy
Dec 15th 2004
From Economist.com
UNLIKE most of George Bush’s White House team, for whom economics is a slave to politics, Gregory Mankiw, head of the White House’s Council of Economic Advisers, labours hard to square the president’s economic policies with sound economic theory. “When I wrote my first economics textbook,” he said in a speech earlier this month, “I told students to keep an eye on three indicators of economic performance: gross domestic product, inflation and the unemployment rate.” By these standards, he pointed out, the American economy is doing admirably.
The Federal Reserve seems largely to agree. On Tuesday December 14th, it raised interest rates by another quarter of a percentage point to 2.25%, its fifth rate hike this year (see chart). Output has kept up its “moderate pace”, it said, despite recent rises in energy prices. Inflation remains “well-contained”, and the jobs market continues to improve, albeit gradually. The Fed thus saw no reason to break its measured stride towards a more neutral rate of interest.
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