Compared to the volatility of 2007-09, the U.S. economy has evolved on a fairly steady path in 2010, with growth settling around trend. Given how much slack opened up during the recession, however, trend growth is currently politically unacceptable. With fiscal expansion having also breached the limits of political tolerance, the only policy option apparently now open is another round of monetary easing, via large scale asset purchases (LSAP). Although it does not openly admit it, the Federal Reserve must be counting on renewed LSAP to work through external channels: in part, by weakening the dollar and, in part, by forcing foreign monetary policy to be easier than would otherwise be the case. Even before LSAP resume, there has been a renewed surge of capital flows to emerging markets, which is straining policy makers’ tolerance in those economies.

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Following the publication of the Global Economic Monitor Phil Suttle hosted a teleconference on August 11, 2010. The recording of the briefing and the Q & A session is now available for replay.

Download the teleconference (.mp3)