Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
Dow vs Precious Metals : Where’s The Beef ? Where’s the Bull ? - 27th Feb 17
Stock Market Sentiment at ‘Extreme Greed’ - 26th Feb 17
Trump Relinquishes Control of Foreign Policy - 26th Feb 17
[Gratis] "Dark Money" Secrets Revealed! - 26th Feb 17
Stock Market SPX New All-time Highs Continue - 25th Feb 17
POWERFUL GOLD & SILVER COILED SPRINGS: Important Charts You Have To See - 25th Feb 17
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Fed Upgrades U.S. GDP Growth Forecast, Remains Significantly Concerned About Unemployment

Economics / US Economy Feb 17, 2011 - 03:12 AM GMT

By: Asha_Bangalore

Economics

Best Financial Markets Analysis ArticleThe minutes of the January FOMC meeting show the Fed more optimistic about economic growth in 2011. The Fed raised the central tendency for real GDP growth in 2011 to 3.4% - 3.9% from the November forecast of 3.0% to 3.6% (see Table 1). The revisions to projections of economic growth in 2012 and 2013 were small compared with the revision of estimates for 2011.


Consistent with the upward revision of real GDP, the unemployment rate was lowered from the November prediction. However, the unemployment rate remains at an elevated level of 8.8% to 9.0% in the fourth quarter of 2011. Predictions of inflation, overall and core, were both raised slightly for the entire forecast period.

Source: http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20110126.pdf

Most members continue to hold that there is a great deal of uncertainty still. The minutes listed five major sources of uncertainty - (1) the nature of economic recoveries after financial crisis, (2) the effects of unconventional monetary policies, (3) structural problems in the labor market, (4) the future path of fiscal policy, and (5) global economic outlook. Despite these significant sources of concern, most members view that risks are broadly balanced with regard to real GDP growth. This is marked change from the view held in November, when most members held the opinion that downside risks to economic growth by far outweighed the upside risks. Pent-up demand and increased ease of credit availability were cited as factors leading to stronger-than-expected growth. Budgetary woes of state and local government translating to a decline in their spending that exceeded expectations, lower house prices and its attendant adverse consequences on household balance sheets and spending, and significantly slow improvements in the labor market which would raise household savings and reduce spending were seen as factors that could stall economic growth.

With regard to the labor market, although the outlook for the unemployment rate was balanced, members noted that if firms are pessimistic about underlying economic conditions and remain reluctant to increase payrolls, the pace of decline of the jobless rate would be less than the current prediction. The staff presented the current status of research about structural unemployment in the January deliberations. The main conclusion was that structural unemployment had risen but by less than actual increase in the unemployment rate. The minutes also noted that many factors that accounted for the increase in structural unemployment would "recede over time." The discussion also mentioned that mismatches of labor skills and "hiring practices" could not be solved by monetary policy. A few others hold that under current conditions monetary policy still had a positive role to play in reducing joblessness.

On the inflation front, compared with the assessment in November, the probability of deflation had dropped significantly. A few members saw upside emanating from the large size of the Fed's balance sheet. The persistent gap between the jobless rate and the long-run benchmark was seen as source for inflation to be lower than projected. A few members noted that higher energy and commodity prices presented an inflationary risk. Others added that there is only small pass-through of these higher prices to overall consumer price indexes.

Given the nature of economic conditions, the Fed plans to complete its purchases of longer dated Treasury securities. The minutes indicate a difference in opinion about quantitative easing, with some members suggesting a reduction as economic conditions improve, while others were unsure about the impact and held that the program should continue. A few others indicated that it was not likely that economic conditions would change sufficiently to justify a termination of the second round of quantitative easing.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife