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The Fed: Fed’s Brainard forecasts ‘above-trend growth’ for economy over next 18 months

Bloomberg News/Landov
Fed Gov. Lael Brainard said she’s worried about growth in risky business debt.

The U.S. economy should be able to shake off trade uncertainty and continue on a moderate expansion path through 2020, said Fed Gov. Lael Brainard on Wednesday.

“In terms of the domestic economy, again, powered by the consumer, I do expect to see trend, of above-trend growth, actually continuing out over the course of the next year, year-and-a half,” Brainard said, in an interview on CNBC.

Some closely watched tracking estimates of fourth-quarter growth, including the Atlanta Fed’s GDPNow tracker, see growth slowing sharply to a 0.4% rate this quarter from the 1.9% rate in the July-September quarter.

Brainard said these tracker estimates are “quite a bit lower” than the consensus of Wall Street economists.

Brainard said she expects some moderation in the second half of the year, but noted the U.S. consumer “has proven enormously resilient.”

Most companies in the consumer sector remain “quite upbeat,” she said.

There should also be some “bounce-back” from special factors in the manufacturing sector, she added.

The monthlong General MotorsGM, -1.70% strike weakened economic growth in the third quarter and economists expect some rebound in coming quarters.

Like many of her Fed colleagues, including Chairman Jerome Powell, Brainard said she supported a pause in interest-rate policy after the three rate cuts engineered since July.

“For my own part, I want to monitor, I want to wait, as I assess how the outlook is adjusting” to the “pretty substantial” easing, Brainard said.

She noted some turnaround in residential investment since the cuts occurred. The risks remain tilted to the downside, Brainard noted.

The Fed’s rate cuts have been described by economists and market participants as so-called insurance against these risks, which include the trade conflict between the U.S. and China.

Stocks were lower Wednesday as Wall Street doubts grow about a trade truce between the U.S. and China. The Dow Jones Industrial Average DJIA, -0.27% was down 71 points in morning trading.

The Fed will release minutes of its October meeting at 2 p.m. Eastern Time. Economists are looking for a sense of how long the Fed pause might last.