Fed Shifts From Secular Stagnation to Accelerationist Stance on US Economy

The Federal Reserve's stance on the US economy has become increasingly bullish, despite public concerns about economic growth. Officials have raised their projections for interest rates and expect a stronger economy to coexist with higher borrowing costs.

In its latest Summary of Economic Projections (SEP), the Fed increased its forecast for 2027, expecting 2.4% growth, 4.1% unemployment, and a federal funds rate of 4.1%. This is a significant change from previous projections, which had growth at 1.8%, unemployment at 4.4%, and a funds rate of 3.4%.

The Fed's evolving outlook has shifted from the secular stagnation thesis to what can be described as secular acceleration. A more productive economy with better investment opportunities is expected to sustain faster growth alongside higher interest rates, indicating greater competition for capital from businesses that see profitable uses for it.