What was the forecast from the FOMC minutes released on February 19, 2009?”
he minutes of the January 27-28 FOMC meeting show the FOMC participants sharply lowering their evaluations of the current economy and forecast growth. They saw risks on the downside with little risk of higher inflation in the near term. They expect significantly lower headline and core inflation during the next few years. Participants were, however, quite uncertain about the outlook. “All but a few saw the risks to growth as tilted to the downside; in light of financial stresses and tight credit conditions, they saw a significant risk that the economic recovery would be both delayed and initially quite weak.” The big area of disagreement was how to go about with continued easing. Some wanted specific targets while others saw the difficulty of doing so. “Several participants indicated that they thought the FOMC should explore establishing quantitative guidelines or targets for a monetary aggregate, perhaps the growth rate of the monetary base or M2; in their view such guidelines would p
Regulators’ outlook on the economy and the housing market recovery is bleak across the board, according to statements released Wednesday. The Federal Open Market Committee saw “that credit markets still were not working well,” according to the quarterly Summary of Economic Projections along that was released Wednesday along with the minutes from the Jan. 27 through 28 meeting and Jan. 16 conference call. The FOMC said the Federal Reserve will have to scale back liquidity programs and reduce the size of its balance sheet to avoid increased inflation when the economy shows signs of recovering. “Many participants noted some risk of a protracted period of excessively low inflation, especially if inflation expectations were to move down in response to lower actual inflation and increasing economic slack, and a few even saw some risk of deflation,” according to a press release on the meeting. “Participants saw no indication that the housing sector was beginning to stabilize,” the FOMC said.
