Posts Tagged ‘economic forecast’

Fed Plans to Stay the Course

Thursday, January 21st, 2010

A Federal Reserve official predicts that 2010 will see a continuing moderate economic recovery withFederal Reserve plans to maintain its nearly zero interest rate policy for the time being.  interest rates kept “exceptionally low” to encourage job creation.  Elizabeth Duke, a Fed governor, said “In the current environment, the Federal Open Market Committee (FOMC) continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.  Such policy accommodation is warranted to provide support for a return over time to more desirable levels of real activity and unemployment in the context of price stability.”

The Fed slashed interest rates to nearly zero in December 2008 in reaction to the worst recession in 70 years, and created other emergency lending facilities.  Speaking to the Economic Forecast Forum in Raleigh, NC, Duke pointed out that recent data on production and spending indicate that economic activity increased at a “solid rate” during the 4th quarter of 2009.

Duke was quick to point out that credit remains tight for businesses; she believes that continued growth is dependent on additional progress in fixing financial markets and re-establishing the flow of credit to households and small businesses.  The Fed will adjust policy if any changes occur in economic conditions.  According to Duke, the Fed has “a wide range of tools for removing monetary policy accommodation when that becomes appropriate.”

Stock Market Heads Toward 10,000 Mark

Monday, September 28th, 2009

The recent upward trend of the stock market has led investment experts to believe that the Dow Jones Industrial Average will soon pass the 10,000 mark  for the first time in a year.

Craig Peckham, equity trading strategist at Jeffries & Co., and Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds, believe it will happen sooner rather than later.

invest“I think we’ll see [10,000] before the end of the year,” Cuggino told CNBC.  “We’re going to continue to see momentum in earnings growth in the third and fourth quarters and that’s going to propel stocks further.”

Cuggino said the markets may be in for a wild ride but they have come a long way in 2009, but he believes economic trends are “ones of growth” and will rally the markets.

Peckham believes the Dow will reach 10,000 in a few weeks.

“My bigger question is that when we will see earnings results in the third quarter — the bar has been raised pretty dramatically and the expectation is for a much more significant improvement in the topline from corporate America,” Peckham said.  “So it’s imperative that we have a real good sense of where expectations lie going into the third quarter, relative to stock prices.”

The harder question is when we will see the buoyant stock market and recuperating earnings affect the labor market.  This is the real indication of recovery.

Chicago Economists Say 2009 Is a Year of Challenge

Tuesday, February 17th, 2009

The economic forecast for 2009 is bleak, although it’s possible that recovery will begin mid-year. This is the opinion of William Strauss and Rick Mattoon, senior economists with the Federal Reserve Bank of Chicago. “We are predicting that 2008 will yield real GDP of 0.2 percent and that 2009 will be 0.7 percent,” Strauss said. “This will be the slowest two-year growth period since 1981 – 1982, an 18-month recession that will be deeper than the 2000 and 1990 – 1991 recessions.”

Although some economists believe that the unemployment rate will hit double digits this year, Strauss and Mattoon optimistically predict that it will level off at approximately nine percent. Real income growth will be flat, and might even decline. The key to recovery is a thaw in the credit markets so that their performance improves.

Trade is holding its own; exports are still in positive territory. Strauss warns, however, that exports can’t be relied upon to drive to the economy, because the global recession means that foreign buyers will purchase less than they previously did.

Given their relative optimism, I wonder if Strauss and Mattoon agree with President Obama, who warned that failure to pass his $800 billion economic recovery package “could turn a crisis into a catastrophe”? Considering the bad review that Wall Street gave to Treasury Secretary Geithner’s preliminary plans for the use of the remaining $350 million of TARP money, it will be interesting to see how the markets react to the House-Senate conference committee’s compromise bill.