U.S. economic growth? Wait ’til next year
The U.S. Federal Reserve seems to be growing gloomier each month. Sure, they’re not the only group whose economic forecasts have been a moving target of late, but check out how their staff view of the U.S. economy has changed in the past few months.
Back in 2007, the hope was that the housing market “correction” would taper off and 2008 would bring healthier growth. Then the best guess was that the economy would regain its footing in the second half of 2008. Now, the horizon is moving into 2010.
According to newly released minutes from the central bank’s December meeting, when it pushed short-term interest rates down to a range of zero to 0.25 percent, Fed staff now think the world’s biggest economy may be a year away from returning to normal growth.
Take a look at how the Fed’s thinking changed between a mid-September meeting of its rate-setting Federal Open Market Committee and the Dec. 16-17 gathering.
Fed staff forecast from the September meeting:
“The staff continued to expect that real GDP would advance slowly in the fourth quarter of 2008 and at a faster rate in 2009, but still less than that of its potential.”
Fed staff forecast from the October meeting:
“The staff expected that real GDP would continue to contract somewhat in the first half of 2009 and then rise in the second half, with the result that real GDP would be about unchanged for the year.”
Fed staff forecast from the December meeting:
“All told, real GDP was expected to fall much more sharply in the first half of 2009 than previously anticipated, before slowly recovering over the remainder of the year as the stimulus from monetary and assumed fiscal policy actions gained traction and the turmoil in the financial system began to recede. Real GDP was projected to decline for 2009 as a whole and to rise at a pace slightly above the rate of potential growth in 2010.”
So tell us what you think. Did they get it right this time?