The economy is expected to return to its normal growth rate in the first quarter of 2018, but that could be pushed back by a new round of wildfires that could further reduce demand for goods and services, the Federal Reserve said Tuesday.
A second round of fires would also hit food and fuel demand, as would an increase in the number of wildfires in the Southeast, the Fed said.
And the Fed has warned that the nation is facing the worst wildfire season since 1997.
In the worst-hit states, the fire season will start in January and run through March.
“In the longer run, a return to a growth rate near its historical average of about 2.0 percent could occur in 2019,” the Fed’s John Williams said in a statement.
But that would likely require the economy to increase its pace of economic growth to 3.0 to 4.0% a year, rather than its 2.8% pace now.
As a result, the central bank has lowered its target for economic growth for 2020 to 1.9%.
The Fed will begin holding quarterly meetings in early February and late March, and will then begin to cut the range for its 2-percent inflation target to 1% to help drive up the economy.
It will also raise interest rates, and then start to raise them again as inflation expectations have improved and inflation is falling.
The central bank’s economic forecast is for the economy in 2019 to grow at about 2 percent a year for the next five years.
Fed Chair Janet Yellen is expected in Washington for a March 20-21 hearing on the economy, which has been one of the hottest issues of the Trump administration.
She has previously said she expects the economy will return to full employment and inflation will remain well below the Fed goal of 2% in 2019.
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