But one reason the boost won’t be as strong as Republicans might like is that the Federal Reserve would be expected to move to keep that growth in check. Mark Zandi, chief economist with Moody’s economy.com, said that if massive tax cuts aren’t offset with correspondingly large tax increases or reductions in government spending, the Fed’s response could even cause the economy to contract. The Fed has a dual mandate to maximize employment and keep the rate of price growth stable, pursuing the latter goal by targeting a 2 percent inflation rate. Several prominent assessments of the Republican tax cuts likewise anticipate that a counter-response from the Fed would limit the gains from them ― even if they don’t quite share Zandi’s level of concern. In a report on the House version of the legislation, the nonpartisan Tax Policy Center also said the Fed’s response would dampen the bill’s impact.

Source: Huffington Post December 01, 2017 00:01 UTC