• After the flood, Fed likely to see little change in economy, policy course

    1 Sep 2017 | Economic News

The economic fallout from Hurricane Harvey will make the Federal Reserve’s job more difficult when it meets in three weeks, but U.S. central bankers have looked past major storms before with little change in monetary policy and are likely to do the same this time.

Superstorm Sandy seven years later passed with barely a mention in the Fed minutes of the day.

Natural disasters can have serious local impacts, devastating families and communities, changing investment and migration patterns over time, and causing some businesses to fail in the moment while others thrive during the rebuild.

But economists generally agree that the long-term national impact of such events is modest, with short-term costs and disruptions offset - and sometimes more than that - by the boost in spending that comes during reconstruction and the surge of investment to replace damaged building and equipment.

“This unfortunate event will not likely affect the overall trajectory of the economy or monetary policy,” Deutsche Bank economists Brett Ryan and Matthew Luzzetti said in a report. “In turn, Fed officials will likely look through some of the potential near-term volatility in the growth data.”

In the short-term, the United States can expect an uptick in jobless claims and perhaps slower-than-expected employment growth; muted retail sales outside of gasoline as fuel prices rise; and a drop in industrial production with between 17 percent and 27 percent of U.S. fuel refining capacity offline as of Tuesday, and major ports closed.

Reference: Reuters

Read more: http://www.reuters.com/article/us-storm-harvey-economy-analysis-idUSKCN1BA2DZ



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