Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17
Global Currency Reserve At Risk - 14th Jul 17
Picking Great Gold Stocks - 14th Jul 17
BBC Tree Expert's Verdict on Sheffield Amey / Labour City Council Tree Felling's - 14th Jul 17
SPX Cycles, Fed Funds and Gold - 14th Jul 17
Should Platinum Be More Expensive Than Gold? - 14th Jul 17
What's Next for US Dollar, Stocks, Bonds and Gold? - 13th Jul 17
India Gold Imports Surge To 5 Year High – 220 Tons In May Alone - 13th Jul 17
Gold and Silver: Your Stomach Is Probably Wrenching Right Now - 13th Jul 17
Gold Industry Is In A Deep State Of Dysfunction, Delusion And Denial - 13th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

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.


© 2005-2017 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