In its FOMC Statement the Fed pledged to hold interest raters low and increase its asset purchases.
The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations.
Fed projections show the expected hit to the economy from Covid-19.
Dot Plot
The Dot Plot is a projection of the FOMC participants’ expected Fed interest rate policy.
No participant expects rates to go negative and no participants expect any hikes through 2021.
Two participants expect at least one hine in 2022.
We are Not Thinking Nor Thinking About Thinking
Translation
We are scared to death the stock market might fall and consumers will stop buying things they do not need.
Mish
How the heck can those idiots at the Fed predict anything. They can’t get out of their way in the real world. The Fed participants can’t agree on rates. No wonder there is a massive screw up in financial markets.
The GDP is really a trash number. Money creation adds to GDP in it’s calculation. Japan showed “growth” even it’s lost decade for similar reasons even though they calculate GDP differently.
Supposedly the “Real GDP” accounts for money creation using the GDP deflator, which I submit is as accurate as the CPI. But the fact remains that the “G”, or gov’t spending part of the equation remains and therefore it doesn’t accurately reflect GDP.
Rothbard, rightly so IMO, argued that if anything the “G” should deduct from GDP, not add to it.
This year feels more like 2008. The actual economy didn’t bottom until a year later. Based on Covid hospitalizations in states that opened first, it is going to be a disaster this summer. I expect shutdowns again this summer in many states. There is really no way around it.
I was just thinking that same thing – 2008. The question is, with the GOP manage to keep the music playing through the election? It may be tough…
The higher the unemployment goes, the higher the stock market goes. Yipee!
The Nasdaq hit 10000.
Makes sense. Unemployment will benefit tech companies. Their self driving cars, etc, are supposed to be ready soon. We will never have to work again.
Exactly. Who needs to go to work when we can all just day trade.
I’d like to live in a post-eork world.
These are fluid, pre-revolutionary times. I wouldn’t plan anything beyond the end of the year, let alone 2022. Forward guidance is as good as virtue signaling.
Personal fortification, positively.
As well as consumers not buying things they don’t need, more unemployment will cause the regular drip of people’s contributions into their pensions, and therefore the stock market to stop. They are also more likely to have to draw on their savings.
Except the people unemployed now were never the engine on the economy. It’s hit low income, low savings households hardest. If it stays this way, it won’t matter at all to the economy.
Perhaps. Many people in the travel and hospitality sectors, airlines, etc (pilots) would certainly have pensions for example.
I’m English so I don’t know about your systems so can only generalise. Over here however all people, over a low income threshold, are required to by law to make contributions and employers do also. Lots of little contributions add up so it will certainly have an impact in the UK and Europe.
Many teachers will be joining the ranks of the unemployed between now and end of July. Austerity budgets mean extra-curricular and electives will be cut. The FED is whistling past the graveyard with the latest projections.
“Unemployment 9.3%”
…
UE rate without participation rate is as valuable as warm spit.
Nonetheless UE will stay high as long as UE benefits are running strong. When they run their course, and job prospects dim, people will drop out of the labor force. Presto, UE comes down.
“No participant expects rates to go negative”
…
Yet.
Old Man River running the show.