Jennifer Carinci
Breakout
Yahoo! Finance
11/3/2011
The Federal Reserve may have released a relatively benign statement taking no further action to stimulate the economy, but a fierce debate is just getting started over the Central Bank’s next moves.
The FOMC statement reiterated that interest rates will hold near zero through mid-2013, and “Operation Twist” —the program to shift its bond holdings toward longer dated maturities, remains in place. This, along with language stating “economic growth strengthened somewhat in the third quarter,” enabled a sturdy Wednesday afternoon market rally.
During his quarterly press conference held nearly two hours after the FOMC statement release yesterday, Federal Reserve Chairman Ben Bernanke issued the committee’s updated economic outlook, forecasting a gloomier picture for GDP and the unemployment rate. The Fed’s 2011 GDP outlook was slashed to a range of 1.6 – 1.7% from 2.7 — 2.9%, and 2012’s cut to 2.5 — 2.9% from 3.3 — 3.7%. The outlook for the unemployment rate is now 8.5 — 8.7% for 2012. Due to the weakened forecast, the Fed Chief made it clear that the central bank is ready to act if necessary.
“You might call it over propaganda,” says Peter Schiff of Euro Pacific Capital in the attached video. ” I think the U.S. economy is getting worse and the Fed is constantly having to ratchet down its previous expectations.”
Bernanke did make it clear that he’s “dissatisfied” with the rate of economic improvement calling it “frustratingly slow.” Subsequently, he’s not alone, as there’s a growing chorus of complaint that wants the Fed to back off.
“By keeping the economy addicted to cheap money, he’s preventing a real restructuring from taking place,” says Schiff. “Part of the recovery process is higher interest rates.”
U.S. rates are set at a historically low range of 0% to 0.25%. The Fed dropped rates this low in December 2008 in an emergency response to the deepening financial meltdown.
“The whole financial crisis of 2008 has its roots in the cheap monetary policy of Alan Greenspan,” Schiff says. “We have to ask ourselves ‘what is the looming crisis that awaits as a consequence of the cheap money policy of Ben Bernanke, because he’s being even more reckless than Alan Greenspan?'”…
The article continues at Yahoo! Finance. There is video of Peter Schiff’s interview in the article.
Related: Federal Reserve Strongly Implies–Obama Must Go Before Recovery Can Occur
The Federal Reserve concluded its regularly scheduled, two-day Federal Open Market Committee meeting today, and their post-meeting statement revealed that they revised downward their projections for GDP and revised upward their unemployment estimates, through 2013.
This strongly suggests that the ten Federal Reserve bank chairman are reading the tea leaves in the same way as 76 percent of Americans, they do not see any substantive improvement on the horizon until after the November 2012 elections, and only expect improvements to begin in 2014 and beyond…
Read the whole thing.
