Tags: Fed | economic | Outlook | grim

Experts: Fed Language Suggests Economic Outlook is Grim

Wednesday, 10 Aug 2011 07:55 AM

The Federal Reserve has said it expects interest rates will remain low for another two years, the first such timeframe ever issued by the monetary authority but also a reminder that the outlook for the economy doesn't look good, experts say.

"They are saying the prospects are somewhat grim," says Joel Naroff, president of Naroff Economic Advisors, according to MarketWatch.

"They are saying hang it up for two years. That is about the best job of killing confidence that I have seen."

The Federal Open Market Committee has currently set interest rates near zero due to weak economic activity.

Every month, the committee meets to review the economy and decide to change interest rates but normally say they're basing their decision on an open-ended outlook.

In August, that outlook wasn't so open-ended.

"The Committee currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013," the Fed statement said.

Other experts agree such language — the first ever from the Fed — means weak growth will remain a reality for the next two years.

"It is a reflection of how weak the recovery is," Paul Ballew, chief economist at Nationwide Mutual Insurance, tells MarketWatch.

Others agree that the faster economic growth once expected for 2011 and beyond is now gone.

"It surprised me that they boxed themselves into a corner that way," says Professor Steve Wyatt from the Farmer School of Business at Miami University, CNNMoney reports.

"It essentially tells markets that they don't see any hope that we will see a stronger economic recovery in the next two years."

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The Federal Reserve has said it expects interest rates will remain low for another two years, the first such timeframe ever issued by the monetary authority but also a reminder that the outlook for the economy doesn't look good, experts say. They are saying the prospects...
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2011-55-10
Wednesday, 10 Aug 2011 07:55 AM
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