Wonkbook: Why the Federal Reserve is rethinking everything

By Ylan Q. Mui The Federal Reserve is being forced to reevaluate its most basic assumptions about the economy after trillions of dollars of stimulus and years of ultralow interest rates have failed to generate a more robust recovery. For years, the central bank's top officials pointed to "persistent headwinds" emanating from the Great Recession …   The latest economic and domestic policy from Wonkblog   Federal Reserve Chairman Janet L. Yellen speaks at an event hosted by the Economic Club of Washington in Washington on Dec. 2, 2015. REUTERS/Joshua Roberts By Ylan Q. Mui The Federal Reserve is being forced to reevaluate its most basic assumptions about the economy after trillions of dollars of stimulus and years of ultralow interest rates have failed to generate a more robust recovery. For years, the central bank's top officials pointed to "persistent headwinds" emanating from the Great Recession as the culprit for the tepid pace of the economy's expansion: Government spending cuts were depressing growth. Households were paying off debt, spending less and saving more. Borrowing money got harder. Once those trends turned around, they argued, the economy would get back to normal. Seven years after the recession officially ended, many of the headwinds have indeed dissipated — yet normal remains elusive. In its place is a gnawing fear that the economy has permanently downshifted into an era of weak growth that policymakers have little power to reverse. Fed officials have all but given up hope of the 3 percent rate of expansion once considered the baseline for a healthy economy. Instead, they are coming to grips with the possibility that lackluster growth is the best this recovery can offer. Read the rest on Wonkblog.   Chart of the day Few people who commit crimes with firearms actually own their guns. Christopher Ingraham has more. Top policy tweets "The top prosecutor in the Freddie Gray case is not happy about having to drop charges https://t.co/WwCtrqlCh7" -- @germanrlopez "Economic growth is relatively strong in four key presidential swing states: Florida, Ohio, Pennsylvania, Virginia https://t.co/NZgMXbW7op" -- @BenLeubsdorf "Reminder to Brotestors, Trump & all TPP haters:Mitch McConnell has already said TPP ain't happening in lame duck. https://t.co/NbeKnl03pU" -- @pkcapitol ADVERTISEMENT   Most Recent Posts from Wonkblog The strange things people searched for during the Republican and Democratic conventions Hot dogs, dive bars and go karts: What people are really looking for at the conventions By Ana Swanson  •  Read more »   Trump lies more often than Clinton. But Americans think she’s more dishonest. Here’s why. This is really not a good sign for Hillary Clinton. By Kim Soffen  •  Read more »   CONTENT FROM ALLSTATE Balancing act Why millennials are taking their time reaching financial milestones New evidence confirms what gun rights advocates have said for a long time about crime Where the bad guys get their guns. By Christopher Ingraham  •  Read more »   Why rich neighbors are bad for you It's an important warning for people who have rich neighbors. By Rachel Premack  •  Read more »   Why the Federal Reserve is rethinking everything Maybe the economy will never get back to normal By Ylan Q. Mui  •  Read more »   How the TPP became the most divisive policy in the Democratic Party In Philadelphia on Monday, delegates chanted "No TPP!" and brandished signs declaring their opposition. They were frustrated that the party's official platform did not explicitly reject the Trans-Pacific Partnership -- a reflection of the fierce disagreement among Democrats about the deal's merits. By Max Ehrenfreund  •  Read more »   The great irony about the issue upending U.S. politics Everyone in politics seems to be against it these days. But Democrats, independents and Republicans agree it's good for the country, according to a poll. By Ana Swanson  •  Read more »   ADVERTISEMENT   Recommended for you   Federal Insider Federal news and policy update, in your inbox daily. Sign Up »         Share Wonkbook:       Twitter      Facebook Trouble reading? Click here to view in your browser. You received this email because you signed up for a Wonkblog newsletter. For additional free newsletters or to manage your newsletters, click here. We respect your privacy. If you believe that this email has been sent to you in error or you no longer wish to receive email from The Washington Post, click here. Contact us for help. ©2016 The Washington Post, 1301 K St NW, Washington DC 20071