Pessimistic Fed to slash growth forecasts

[dex]

Those looking for general inflation should take a look at this. Food and health ins. might increase but unemployment pressures will keep prices down.

http://www.ft.com/cms/s/0/b92ecb0c-f596-11df-99d6-00144feab49a.html#axzz163zbb0gA



The revised forecasts will show how the Fed became much more pessimistic over the summer and also highlight fears among a few members of the FOMC that some of today’s 9.6 per cent unemployment rate is structural and will take years to cure.
When the FOMC published its last forecasts in June most members thought that 2011 growth would be between 3.5 and 4.2 per cent, but many now think growth will be between 3 and 3.5 per cent, and some expect less than that.

The committee will also issue 2013 forecasts for the first time and officials who supported further asset purchases are likely to predict that core inflation will stay below the Fed’s 2 per cent goal for the next three years.
“It is not unreasonable to expect 1 per cent inflation in 2012. Unless the actual conditions turn out to be very different from my forecast, inflation of less than 1.5 per cent in 2013 is a strong possibility,” said Charles Evans,

 

[traineeinvestor]

Assuming that the Fed's forecast turns out to be accurate, the implications are continued low interest rates and loose monetary policy.

It also stands in stark contrast to many other parts of the world which are trying to cool overheated markets, prevent asset bubbles developing and generally pre-empt or reign in inflationary pressures. As examples, China, Hong Kong, Singapore and New Zealand have all introduced measures to cool their residential property markets. A number of countries have either raised interest rates or increased reserve requirement for banks or made it more difficult for foreigners to invest (or a combination of the three) for the same reasons.

The contrasts between economic conditions in different parts of the world and the implications for my retirement planing are both interesting and a cause of concern.

 

[dex]

It also stands in stark contrast to many other parts of the world which are trying to cool overheated markets, prevent asset bubbles developing and generally pre-empt or reign in inflationary pressures. As examples, China, Hong Kong, Singapore and New Zealand have all introduced measures to cool their residential property markets. A number of countries have either raised interest rates or increased reserve requirement for banks or made it more difficult for foreigners to invest (or a combination of the three) for the same reasons.

That makes sense - the 'leakage' of all the stimulus & balance of trade out of the USA into all those smaller economies caused the inflation while the unemployment and sentiment in the USA keeps prices low. But, the USA's inflation might come later in the decade.

 

[FinanceDude]

The Fed has become WAY TOO BIG for its britches.........

 

[Gone4Good]

Those looking for general inflation should take a look at this. Food and health ins. might increase but unemployment pressures will keep prices down.

Some of us have been (correctly) saying this for a couple of years now. Many others who (incorrectly) called (and call) for tighter monetary policy to ward off hyperinflation are still incredibly singing the same tune without any apparent reflection on their continuously erroneous forecasts. And unfortunately, the critics seem to be getting the upper hand, notwithstanding their proven lack of understanding of the current economic situation.

Criticism Hinders Fed Plan Effectiveness (WSJ)