Federal Reserve Chairman Jerome Powell speaks at the annual meeting of the National Association for Business Economics, Tuesday, Oct. 2, 2018, in Boston. (AP Photo/Elise Amendola)
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The Federal Reserve painted a picture of the U.S. economy that was almost too good to be true at its last meeting, with inflation seen contained in the near future despite the lowest unemployment rate in 20 years. The Fed's forecasts were labeled "out of this world" by one economist at the annual National Association for Business Economics conference in Boston this week.On the 10th anniversary of the 2008 financial crisis, which started with an unexpected panic in an under-appreciated corner of the financial sector, the emphasis in recent Fed speeches and research on avoiding excess leverage and financial market imbalances is understandable, but risks ignoring the possibility that the next recession may result from runaway inflation.The likely choice of Liang comes after Fed chair Jerome Powell recently downplayed the relevance of traditional inflationary signals in setting interest rates and noted that in the last two recessions the trouble started in financial markets.Liang, a senior fellow at Brookings Institution, has also argued that tighter monetary policy and early intervention is best to ward off possible crises, so some expect her to oversee a broader financial stability file as a Fed governor.
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