Federal Reserve Report Overview: Economy is Easing

Reading the Federal Reserve report we saw that they signaled that due to the weak economy the Fed will keep prices in check even though growing concerns of inflation increase as we pump trillions of dollars into our financial system. The lending rate will stay at the all-time low somewhere between zero and 0.25 percent. Bernake said he will keep it at this rate for an extended period. A problem I felt was the Fed offered no new assurances that they would step up their purchases of government bonds and mortgage securities, to try to drive down rates on consumer debt. For Bond investors, this is a great fear as the prospect of higher interest rates is near. We also saw that the Fed’s observation of Commodity prices is rising.  Overall the Fed  delivered a slightly more encouraging assessment of the economy. So will the Fed continue to regulate and inject liquityd? Yes, in March, the Fed launched a $1.2 trillion effort to drive down interest rates to try to revive lending and get Americans to spend more freely again. To add to this they will spend up to $300 billion to buy long-term government bonds over six months and boost its purchases of mortgage securities. Also, the Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year. I believe since we are slowly seeing signs of the economy stabilizing it is smart move by the Fed to keep a steady as it comes course of action. Fed policymakers noted that the “pace of economic contraction is slowing” and that conditions in financial markets have “generally improved in recent months.” These are much better signs from what we heard in the last fed meeting. Bernanke has predicted the recession will end later this year. Some analysts say the economy will start growing again as soon as the July-September quarter. I foresee a similar timetable yet see true economic prosperity coming in 2010. What many call the lifeblood of the economy, consumer spending, has shown signs of strength in recent terms. Concerns are that unemployment will push higher even after the recession ends. Right now our unemployment rate is at 9.4% and I expect it to go higher in 2010. Finally, Barack Obama addressed the issue acknowledging that the jobless rate is going to climb over 10 percent, he’s not satisfied with the progress his administration has made on the economy. He defended his recovery package but said the aid must get out faster. I agree that so far Obama has done nothing to help the unemployment situation something he campaigned hard on fixing, so I hope to see more support from his administration to sort out the crisis in hand. Its scary thinking that it could continue to rise as more unemployed Americans will only deepen us into the recession. Overall, an overview of the feds meeting showed more light on the economy with brighter prospects of the future, yet we still see some large gaping holes that need attention. On a better note, go USA on their route to the World Cup as they defeated Spain 2-0 today!!!

Further discuss this topic on at Is the Economy Easing?