The Fed now believes that the American economy will grow between 1.8% and 2.5% in the following year. The average of 2.15% is a lot less than the 2.4% that Wall Street predicts. In June when the subprime crisis started the Fed still predicted a growth of 2.6%. In order to become more transparitive, the Fed is going to give a growth prognosis four times a year in stead of 2 time a year.
It's remarkable that the Fed only estimates a maximal growth of 2.5%. This depressed point of view is bad news for Wall Street. Due to this negative point of view it is not likely that the interest will be lowered soon, dispite a deceleration of the growth. The Fed is doing so because she is the only central bank in the world who has double objectives, price stability and full employment.
The Fed admits that the lowering of the interest on October 31 was a close call. Big problems in the housing market were eventually the incentive to lower the interest.
The Fed also states that a significant decrease of the dollar could bring inflation along. Hereby they are leaving the door open for a possible increase of the interest rate.
It's remarkable that the Fed only estimates a maximal growth of 2.5%. This depressed point of view is bad news for Wall Street. Due to this negative point of view it is not likely that the interest will be lowered soon, dispite a deceleration of the growth. The Fed is doing so because she is the only central bank in the world who has double objectives, price stability and full employment.
The Fed admits that the lowering of the interest on October 31 was a close call. Big problems in the housing market were eventually the incentive to lower the interest.
The Fed also states that a significant decrease of the dollar could bring inflation along. Hereby they are leaving the door open for a possible increase of the interest rate.
If the Fed wants to become more transparitive they'll have to hurry up. Nobody knows what to expect: higher or lower interest rates? There are discussions about interest rates but such decissions should be unanimous.
Secondly it's becoming very hard to interprete the released figures. Mostly they are smukked up and only in the next period they are adjusted. This means that people are working with the wrong figures for months. Therefor I think it's a good idea to give 4 growth prognosis a year instead of 2. But this is hardly enough...
Thomas
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