Friday, July 13, 2012

What the Fed Said

The Lehmann Letter (SM)

Yesterday’s Letter featured The New York Times’s assessment of the Federal Reserve’s economic outlook as expressed at the latest meeting of the Federal Open Market Committee. (Minutes released with three-week delay.)

Here’s what the Fed said:

“Minutes of the Federal Open Market Committee

June 19-20, 2012”

“Staff Economic Outlook

“In the economic projection prepared by the staff for the June FOMC meeting, the forecast for real gross domestic product (GDP) growth in the near term was revised down. The revision reflected data indicating a slower pace of private-sector job gains, more-subdued retail sales, a lower trajectory for personal income, greater restraint in government purchases, and weaker net exports than the staff anticipated at the time of the previous projection. Moreover, recent adverse developments in Europe and tighter domestic financial conditions led the staff to revise down somewhat the medium-term forecast for real GDP growth. With the drag from fiscal policy anticipated to increase next year, the staff projected that the growth rate of real GDP would not materially exceed that of potential output until 2014 when economic activity was expected to accelerate gradually, supported by accommodative monetary policy, further improvements in credit availability, and rising consumer and business sentiment. Increases in economic activity were anticipated to narrow the wide margin of slack in labor and product markets only slowly over the projection period, and the unemployment rate was expected to still be elevated at the end of 2014….”

Once again: There’s little cause for optimism in the Fed’s forecast.

(Summer season: The Lehmann Letter will be in summer-vacation mode during July and August.)

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© 2012 Michael B. Lehmann

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