The US Federal Reserve is expected to slash its growth forecasts and predict higher unemployment when it releases updated economic projections on Tuesday, perhaps explaining its recent decision to launch it’s new $600 Billion program to purchase long term securities.
When the FOMC published its June economic growth forecast it estimated that 2011 growth would be between 3.5 and 4.2 per cent, but many analysts expect a revision to 3 and 3.5 per cent, or perhaps lower. Likewise the Federal Open Market Committee expects the unemployment problem to persist beyond 2012 with their economists now suggesting that much of the unemployment is structural in nature and will take years to correct (here).“FOMC members have made particularly aggressive upward revisions to their unemployment forecasts, with a large number now predicting that it will still be 8 per cent or above at the end of 2012, compared to the 7.1 to 7.5 per cent that they forecast in June.“Because I expect hiring to strengthen only gradually, the unemployment rate is likely to remain elevated for quite some time. In fact, I do not expect it to fall below 8 per cent before 2013,” Sandra Pianalto, president of the Cleveland Fed”
They suggest inflation will remain anemic until at least 2013, anticipating that,
“It is not unreasonable to expect 1 per cent inflation in 2012. (here)
While the Fed continues to struggle to reinvigorate the economy, it is obvious that the billions in stimulus dollars spent by the Administration have failed to re-ignite the economy!
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