The state of the US economy is said to be worse than advertised. This is according to economists at JP Morgan Chase & Co. The next Fed Chairman will face an uphill task of setting things right. The economists have further reported declining GDP since 1990s.

The Fed needs to tighten credit in order to gradually reach top speed potential growth rate without heating up inflation. But lower rates of growth along the way will make it harder to reduce the federal budget deficit.

According to Edmond Phelphs a professor at Columbia University, it is hard to be optimistic because there is less stimulation and innovation going on. Contrary to Phelphs’ belief, the Fed forecasts that economy will grow at the rate of 2-3 per cent.

Related article: http://www.businessweek.com/news/2013-08-23/jpmorgan-sub-new-normal-growth-seen-confronting-next-fed-chief