Posted on 11/12/2009 11:50:12 AM PST by Pontiac
Economists in the latest Wall Street Journal survey, on average, expect the Federal Reserve to raise interest rates around September 2010, a politically sensitive time considering midterm elections will be right around the corner and unemployment is forecast to still be over 9.5%.
The 52 surveyed economists—not all of whom answer every question—on average expect the unemployment rate to rise to 10.3% by the end of this year from its current 10.2%, and they expect it to stay above 9.5% through 2010. The respondents expect job growth to return over the next 12 months, but the forecast calls for an average of about 50,000 jobs to be added per month over that period. The economy needs to add about 100,000 jobs a month just to keep up with new entrants to the labor force.
The last time the unemployment rate topped 10%—in the 1980s—the following six quarters posted average growth of more than 7% but still only managed to bring the jobless rate down by about three percentage points.
Despite the challenges, confidence is running high in the Fed to manage the economy. Thirty of 50 economists said that the central bank will raise interest rates at the right time, while 18 said the Fed will be too slow. That contrasts with widespread criticism of the Fed's timing in the past. In the March 2008 respondents said the central bank was too slow to raise rates in 2003, and Fed Chairman Ben Bernanke has been accused of being slow to cut rates.
But that doesn't mean an increase in rates is imminent. Most economists said the Fed won't raise rates until the third quarter of 2010 at the earliest. Futures markets are putting 90% odds of a rate increase in August next year.
(Excerpt) Read more at online.wsj.com ...
It's the Economy stupid!
Why the hell would a bank lend money at today’s low rates when faced with higher risk and inflation?
You want banks to lend money, increase rates.
Why? Because it is popular belief that low interest rates spur industrial/economic growth. And it is true if credit is available.
Unfortunately it is also true that expectation of inflation makes lenders wary of easing lending requirements.
With lenders shuffling their money off in to money markets or other safe havens unemployment is not likely to abate.
Eventually the Fed will raise interest rates.
They may wait for signs of inflation. I expect interest rates to rise sooner than later.
With the Treasury pumping dollars in to the economy it is only a matter of when not if interest rates increase.
Stagflation is coming better get your leisure suit out of mothballs.
I respectfully disagree with the rosy scenario. I believe the economy is still weaker than the Fed believes or understands.
The high unemployment is going higher — I believe we’ll crash through 11% by early spring.
Every policy of this economically-illiterate Administration — whether proposed or in place - is destroying jobs and raising the price of labor. No rational person in his/her right mind would hire anyone under these circumstances.
>> it is popular belief that low interest rates spur industrial/economic growth
Yeah, that’s the way it’s supposed to work.
But the only thing low interest rates have spurred this time around is the carry trade. The market has gone up, gold has gone up, oil has gone up — but there hasn’t been any industrial or economic growth, except government. And certainly no employment growth.
When rates go up (as they eventually must) the carry trade will unwind with a vengeance.
Oh come on!
They are not economically illiterate.
I am sure that they have read Adam Smith’s and Alan Freedman’s works.
But (unfortunately) they have also read Marx and Keyes and choose to believe them.
Our problem is that these are not stupid people; they are clever. Our greatest peril is they are clever fools.
I agree that the Obama administration seems to be doing almost every thing it can to stifle growth. The question about this that the MSM seems to deliberately ignore is why are they doing what they are doing.
The press seems to take for granted that the administration has good intentions. The administration says health care is a right and the press follows. The administration says Climate Change is a danger that must be addressed by doubling energy cost for everyone and the press follows.
Where is the adversarial press of the Bush administration?
There are two models that this economy could follow; FDR and Carter.
FDR
High taxes on the rich, high unemployment and deflation.
Carter
High taxes on the middle class and rich, high unemployment and high inflation.
Because Obama seems intent on taxing everyone to the limit I would bet on the Carter model.
On the other hand because Obama’s plans seem to put even Carter’s most ambitious dreams to shame and because Obama has the Congress on his side where Carter did not, this economic retrenchment could break new ground. Obama could burn the crops and salt the ground for decades to come.
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