Dog Catcher’s thoughts: The good news is that the Fed does not see inflation rising above 2.4%. The bad news is that employment does not return to early 2007 levels until 2012+. There is a key caveat to these predictions: massive national debt is due for payment in Fall of 2011: $1.7T.
The Fed uses the big magic waving hand to acknowledge that there could be issues: “In the absence of any further shocks, participants generally expected that the economy would converge over time to a sustainable path with real GDP growing at a rate of 2.5 to 2.8 percent …” No word or thoughts about how the U.S. will pay down almost $2 trillion in debt within 12 months.
As for GDP not exceeding 3% through 2012 then America should focus on insulating our economy against shocks, minimizing national debt, getting serious about national debt paydown, and adopting policies which encourage diversification of our economy with an emphasis on small business vitality.
Key predictions from the Federal Reserve Board November minutes of the Federal Open Market Committee (FOMC):
- Looking beyond 2009, the pace of the economic recovery expected to be restrained by household and business uncertainty, weak labor market conditions, and slow waning of tight credit conditions in the banking system.
- Five or six years would be needed for the economy to converge fully to a path characterized by a sustainable rate of output growth and by rates of unemployment and inflation consistent with the Federal Reserve’s objectives.
- Looking beyond 2009, participants’ outlook for real GDP growth (central tendency) of output growth projections is 2.5 to 3.5 percent for 2010, 3.4 to 4.5 percent for 2011, and 3.5 to 4.8 percent for 2012.
- In the absence of any further economic shocks, participants generally expected that the economy would converge over time to a sustainable path with real GDP growing at a rate of 2.5 to 2.8 percent, reflecting longer-term demographic trends and improvements in labor productivity.
Read Full Story: FRB: Summary of Economic Projections, November 3-4, 2009.