U.S. economic recovery challenges Fed’s latest scheme

The Federal Reserve’s latest scheme of keeping ultra-low interest rates and increasing tolerance for inflation were put under intensive pressure after the United States’ economy recovered well beyond expectations.

The economy of the United States had recorded a “slight to modest” rebound. This followed after consumers bought properties and returned to their spending practices, a compilation of surveys and interviews conducted by the Federal Reserve’s 12 regional bank showed.

On an annual basis, the U.S. economy probably expanded by more than 30% last quarter. The jump compensated for the 31.4% contraction seen in the second quarter backed by large volumes of fiscal stimulus injected by the Fed.

However, policymakers’ tolerance regarding the 2% mark varies. Chicago Fed President Charles Evans agreed on a 2.5% to 2.75% inflation in a year, while Dallas Fed President Robert Kaplan deemed that anything more than 2.25% would raise concerns.