The Fed's Doom and Gloom Predictions for Our Economy in 5 Graphs

[xchrom]

http://www.theatlantic.com/business/archive/2012/01/the-feds-doom-and-gloom-predictions-for-our-economy-in-5-graphs/252014/

***snip

GDP Predictions
A note on reading the graph: The dark blue band represents the "central tendency of projections" and the light blue band represents the full range of projections.

The upshot is that Fed officials believe the economy will hit 3% to 4% yearly growth in the next three years. That's better than we're expanding now, but it's still worse than most recoveries from past recessions.


Inflation Predictions
Where did the inflation vigilantes go? FOMC members predict PCE inflation to fall in 2012, as energy prices cool off, and hold steady for the next two years.


Unemployment Predictions
The unemployment rate is projected to fall steadily over the next three years, with most predictions putting the official rate around 8 percent at the end of 2012 and 7 percent at the end of 2014, fully seven years after the recession officially began, in December of 2007. Even more concerning: The longer-run rate is projected to stay elevated near 6 percent, 2 percentage points higher than our unemployment in the middle of the last decade.

[PETRUS]

1. Here's what I'm wondering.

Why doesn't the Fed deliberately target a somewhat higher rate of inflation (4% rather 2%, or something)? That would have the effect of lowering real interest rates further, which would stimulate growth, boost employment and also provide much needed debt relief. Before Bernanke was at the Fed, he advised exactly that policy for this kind of situation.

[bluestateguy]

2. We were warned 3 years ago that the recovery would be a long, hard slow slog

And that is exactly the way it is playing out.