Page 7 - ATD19DEC2015
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U.S. NEWS A7
Saturday 19 December 2015
US Financial Front:
Spending bill may aid economy just as Fed is pulling back
C. S. RUGABER about 6 percent next year. cent in October compared Federal Reserve Chair Janet Yellen speaks during a news
AP Economics Writer A separate tax measure with a year earlier. Addi- conference in Washington, following an announcement that
WASHINGTON (AP) — Just provides $680 billion in tax tional government spend- the Federal Reserve raised its key interest rate by quarter-point,
as the Federal Reserve is cuts over 10 years. It would ing can also translate into heralding higher lending rates in an economy much sturdier
pulling back slightly on the do so mostly by extend- more purchases of military than the one the Fed helped rescue in 2008.
economic accelerator, ing or making permanent equipment. The economic
Congress is pressing down about 50 different expiring lift from government, if it (AP Photo/Susan Walsh)
a bit harder. tax breaks. proved significant and if it
The spending and tax-cut That measure follows Con- raised undesirably low in- more. That likely helped set be gradual and that it may
package that Congress gress’ approval of a five- flation, could make it eas- the stage for the Fed’s rate delay further increases if
approved Friday stands year, $305 billion highway ier for the Fed to continue increases. “Fiscal policy the economy weakens.
to modestly boost growth bill earlier in December. raising short-term interest actions at both the federal The Fed’s interest rate tar-
next year. It could also help Taken together, the mea- rates. On Wednesday, cit- and the state and local get will likely remain be-
drive a shift away from gov- sures could increase ing the improved econo- levels look like they are no low its longer-run average
ernment as a drag on eco- growth to about 3 per- my, the Fed announced longer a significant drag on all next year, Yellen said,
nomic growth to a source cent next year, Carson its first rate increase in nine economic growth,” Yellen meaning that consumer
of potential stimulus. estimates, up from a likely years. For seven years, the said in May. The Fed said borrowing rates should also
“This shift ... is currently be- pace of about 2.25 per- central bank had kept its Wednesday that any rate remain at historically low
ing overlooked by financial cent this year. key short-term rate at a re- hikes next year would likely levels.q
markets and analysts,” said Alec Phillips, an economist cord low near zero to en-
Joseph Carson, U.S. econ- at Goldman Sachs, fore- courage borrowing and
omist at asset manager Al- casts a smaller gain and spending. Fed Chair Janet
liance Bernstein. “But we envisions overall growth Yellen’s predecessor, Ben
believe this will be a key next year of 2.25 percent. Bernanke, had frequently
aspect of a more positive The picture now looks called on Congress to limit
and faster growth environ- brighter for state and lo- its budget cuts in the short
ment for next year.” cal governments, too. Their run to help the economy
Economists at Goldman tax revenue has increased recover. But in recent
Sachs have forecast that as the economy has im- months Yellen has noted
increased federal spend- proved. The economy now that governments at all
ing and tax cuts should has about 4.5 million more levels were spending a bit
add to economic growth jobs than it did before the
in 2016 for the first time in Great Recession began in
six years. late 2007.
The $1.1 trillion budget Spending on construction
deal boosts spending for at all levels of government,
most Cabinet agencies by for example, rose 6.1 per-
