Mish is on the money here. Why does anyone take the Bernank and his Fed serious? The FOMC statement was a joke, and the Bernank’s follow on news conference was pathetic.
Fed Lowers GDP and Inflation Forecast, Disingenuously Frets Over Fiscal Recklessness; Over and Under Bets
The Fed has lowered (yet again) it’s economic forecast. It also lowered its inflation expectations, primarily because of falling gasoline prices.
Please consider Fed dims outlook for jobs and growth for 2011
Federal Reserve officials are more pessimistic about prospects for economic growth and employment than they were two months ago.
In an updated forecast, the Fed estimated Wednesday that the economy will grow between 2.7 percent and 2.9 percent this year. That’s down from its April estimate of between 3.1 percent and 3.3 percent. The downgraded revision is an acknowledgment that the economy has slowed, in part because consumers have been squeezed by higher gasoline prices.
Growth at the rate the Fed is projecting won’t be enough to significantly lower unemployment, now at 9.1 percent. The Fed estimates that unemployment will still be around 8.6 percent to 8.9 percent by the end of the year.
Growth would need to pick up in the second half of this year to meet even the reduced estimates of the private economists and the Federal Reserve. The economy grew at an anemic 1.8 percent annual rate in the first three months of the year. Many economists believe the economy is expanding only slightly more in the current quarter.
The Fed trimmed the top range for overall inflation in the new forecast. That reflects the fact that the spike in energy prices earlier this year has begun to recede.
The central bank now sees inflation rising 2.3 percent to 2.5 percent this year, as measured by a price gauge tied to consumer spending. That compares with an April forecast that showed a higher upper range of 2.8 percent.
The Fed estimates that “core” inflation, which excludes energy and food, will increase 1.5 percent to 1.8 percent. That’s slightly higher than its April forecast of an increase of 1.3 percent to 1.6 percent. The revised estimate is still within the Fed’s comfort zone for inflation.
Over and Under Bets
I will take the “over” on the Fed’s unemployment rate and the “way-under” on GDP. From where I sit, this economy has all but stalled.
Disingenuous Fretting Over Fiscal Issues
Bloomberg reports Fed Officials Fretting Over Fiscal Recklessness
Federal Reserve Chairman Ben S. Bernanke is stepping up his call for the government to rein in the federal deficit — just not now.
The central bank chief and his lieutenants are expressing concern that Congress’s failure to close what Dallas Fed President Richard Fisher called the nation’s “fiscal sinkhole” puts the economy at risk. At the same time, they say that acting too quickly may choke off a recovery hobbled by an unemployment rate above 9 percent.
Lawmakers such as Senator Pat Toomey, Republican of Pennsylvania, and Senator Ben Nelson, Democrat of Nebraska, are insisting on spending cuts as a condition for an agreement to raise the debt limit. Bernanke, in a June 14 speech, said the limit shouldn’t be used as a bargaining chip to force cuts, and that failing to raise the cap could cause “severe disruptions” in financial markets.
“I urge the Congress and the administration to work in good faith to quickly develop and implement a credible plan to achieve long-term sustainability,” Bernanke said.
Politics of Budget
The Fed is “concerned with the playing around and the politics of the budget,” said Robert Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “Their belief is that fiscal stimulus is the way to get out and get the economy growing faster.”
While Fed officials are urging lawmakers to adopt a long- term plan to lower budget deficits and the debt, they are warning against cutting too quickly.
“No issue is more important than a credible commitment for getting our fiscal house in order, but at a pace that does not forestall a sustained recovery,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a June 7 speech.
Keynesian and Monetarist clowns never want to do anything now. Instead they want to appear as if they will support fiscal and monetary soundness, tomorrow.
In practice, tomorrow never comes. The Fed’s statements on fiscal policy are disingenuous claptrap, at best.
Mike “Mish” Shedlock