Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

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.


© 2005-2015 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

Biggest Debt Bomb in History