Forecasting the Future of the US Economy Over the Next Year - Research Paper Example

However, the recovery of the U.S. has been expected to carry on, albeit at the sluggish pace (Elwell, 21). This paper is aimed at providing forecasts on the future of the US economic variables. Effects on economic variables: The level of inflation has been very high since 2007. This high level of inflation is now considered as the biggest problem in the country by the Fed. Due to this high level of inflation, consumers are not getting capable of purchasing costliest goods and services and hence business organisations which are engaged in production of these goods and services are leaving the industry.

Again this is reducing the level of income in the country and hence the level of demand for necessary goods and service. The Fed is expecting to have a subdued in the next few years because of weaker level of real economic activities prevailing in the country. But the Fed is expecting to have a lower level of inflation rate in 2013 which is expected to increase the volume of economic activities in the country. The Fed is expecting that the current rate of change in overall prices is expected to fall to 1% to 2% from its current level of 3% within five years.

But the Fed is expecting that the rate of inflation will remain unresponsive in newt few years due to the fact the American economy is still under the curse of financial and economic crises situations (Minutes of the Federal Open Market Committee, 1). The Federal Reserve or Fed, in short, holds a very positive view regarding the current economic activities and the current condition of the financial market of the country. The chairman of the Fed, Dr. Ben S. Bernanke, has argued that after the global financial crisis of 2007-08, the American economy is experiencing greater volume of economic activities (Bernanke, 1).

The IMF predicts the value of real GDP in the US to rise at 1.5% in 2011 (which is lower by1.0 percentage points than that of in June 2011 prediction) and at 1.8% in 2012 (which is lower by 1.1% than the June 2011 prediction) (Elwell, 21). The Open Market Committee of the Federal Reserve predicts the real GDP in the year 2012 to exist in the range of between 2.3% and 3.5% (the growth prediction for the year 2012 almost about 0.5 percentage points lower than that has been made in the June 2011).

Also according to the Fed predictions the rate of unemployment is estimated to be in the range between 8.1% and 8.9% in the year 2013 (Fiscal Year 2013: Analytical Perspective: Budget of the U.S. Government, 19). Global Insight, which is a renowned economic forecasting private company, has recently predicted that the real GDP in the US will advance 1.4% by the end of 2012 (lower by 1.3 percentage points compared to its June 2011 estimation). The rate of unemployment in the country has been estimated to be around 9.

3% in the year 2012 and 2013 (Elwell, 21). The level of FDI in the country is not expected to grow at much rapid speed compared to the past. In the global increasing in the amount of FDI inflow to $1.4–$1.6 trillion in the year 2013, the US inflow of FDI is predicted to move in the range of $245 to $255 billion in 2013 (GLOBAL INVESTMENT TRENDS, 17). Again, it is expected by the researchers that the rate of interest will remain comparatively low as well as stable in the next year following the rapid growth of developing countries.

This increasing growth of countries such as India and China will increase the volume of trade in favor of USA. Also the corporate bonds and