Kansas City Fed President Esther George said in a speech that weakness in Q1 growth could reflect “transitory factors” such as the government shutdown, financial volatility, an unusually harsh winter, and heightened policy uncertainty. But over the medium term, the “generally positive outlook” of the US economy has “several prominent downside risks”.
The biggest risks come from slower growth abroad, “particularly in China, the euro area, and the United Kingdom.” Together with waning fiscal and monetary stimulus, they “represent a stronger headwind” then George’s baseline forecast. Right now, she noted that “data are noisy” and more time and evidence are needed to “separate the signal from the noise”.
