Friday, October 09, 2015

Buried in the Fed minutes is another downgrade to the U.S. economy

Marketwatch reports:
A goal of a 4% economy? That objective, mentioned frequently in the 2016 presidential race, is getting farther away, according to the latest projections from the staff of the Federal Reserve.

Minutes of the Fed’s Sept. 16-17 policy meeting disclose the Fed staff further trimmed its assumptions for the rates of productivity and potential growth over the medium term. The minutes did not specifically quantify the new forecast of the Fed’s in-house economists.

The Fed staff’s view was already gloomy. A mistaken leak this summer by the U.S. central bank revealed, going into the Fed’s June policy committee meeting, the U.S. central bank’s staff penciled in potential growth averaging just 1.74% over 2015-2020, according to the document now on the Fed’s website. That’s down from an average growth rate of 3.1% over the past 50 years. Ordinarily those forecasts would have been kept secret for five years.

Fed officials — in other words, the people who get to vote on interest rates — think the economy can growth a little faster than the staff. They pencil in 2.0% for the economy’s long-run growth rate.
Isn't about time to end the Fed? The absurdity of "voting on interest rates".