Hey, Fed, the economy is slowing down

President Donald Trump’s strong economy has exhibited signs of slowing down, and the Federal Reserve would be wrong not to take notice. Fourth-quarter GDP forecasts now hover in the mid-to-high 2 percent range — nothing like the 3-to-4 percent range we’ve seen this year. Indeed, a number of indicators point to a slowdown.

Although the president and the Republican-controlled Congress deserve praise for tax cuts, keeping this country in its second-longest postwar expansion and making it attractive to domestic and foreign investment, the investment spike they brought and the resultant economic stimulus they produced have waned, as expected.

Central bank tightening has been felt worldwide. The Fed began reducing assets from its balance sheet late spring 2016, thus gradually mopping up liquidity from the market, even as it embarked on interest rate hikes. Increasing public and private debt levels have also led to tighter monetary policy in Asia, Turkey and other emerging markets. Europe, the other major cen- ter of global growth, also saw the European Central Bank begin reversing quantitative easing (i.e., central-bank asset purchases). Thus, central bank stimulus is down worldwide and credit has tightened in foreign markets. A further deceleration of trade, caused not only by increasing trade friction, won’t help world growth forecasts either.

While deregulation and increased oil production have propelled the United States to the top of the world’s oil-producing nations, the expansionary effect of lower oil prices has been countered, to a significant extent, by a stronger dollar — thanks in no small part to Fed rate hikes — making U.S. exports less competitive abroad. Lower oil prices also have strongly contractionary effects in oil-producing states.

In sum, both for domestic and international reasons, a slowdown is likely. In case Fed Chairman Jerome Powell needs any reminding, it is better to err on the side of a little more inflation and end up with a soft landing.