Minutes for FOMC Meeting Indicates Higher Unemployment, Deepened Recession

The Federal Reserve Minutes of FOMC meeting was released showing projections of the Federal Reserve governors along with Banks presidents about the future outlook for this year and the upcoming year.

During the last FOMC Rate decision meeting the Fed preserved the benchmark interest rate at record lows ranging between 0.0% - 0.25%, which also witnessed the release of a new program worth of $300 billion aimed to purchase long term treasury securities in order to stimulate growth in the economy, the decision came in UNANIMOUS.

The Minutes clarified that number of economic indicators started to improve significantly during the month of April indicating that economic condition are starting to stabilize conversely the pace of deterioration has slowed down.

Consumer spending throughout the first quarter of this year improved compared with the second half of 2008, whereas the housing sector activity remained limited even as it showed signs of stability during February and March.

On the other hand the business sector remains under severe pressures whereas production levels continued to decline further in addition to high unemployment rates which reached 8.5% in March and now at a 25 year record high of 8.9% causing inventories to decline during the past three months, not to mention a the drop suffered in the investment sector.

Fed Minutes showed that inflation levels whether on the headline Consumer Prices or the Core Consumer Prices have picked up steadily over the first three months of this year.

The labor sector continues to be on the receiving end of the worst financial crisis since seven decades, showing severe decline during the first quarter especially in March, meanwhile industrial sector dropped massively during the month of March which lowered energy consumption.

The Minutes also showed the Real consumer spending has inclined on a gradual pace throughout the first quarter of this year, compared with the second half of 2008, as for inflation levels it inclined as well during the first quarter of this year as seen in the CPI report compared with the previous declines witnessed in late 2008.

Consumer goods inclined during the month of March but remains lower than the previous levels, meanwhile the Fed Minutes pointed out inflation expectations on the short term has inclined during the of April, while not changed on the long term.

As for the general outlook for the American economy the Minutes showed a gradual improvement in economic activity, especially shown throughout the financial sector as higher consumer confidence and business confidence made it possible for the sector to improve despite low confidence levels. Seemingly consumer spending, the housing sector and manufacturing orders have inclined and improved over the course of this year.

Fed governors sees that deflation levels have started to fade away under the current incline in inflationary levels, where they expect that the downside pressures on inflation to persist under the sinking economic conditions and lower energy consumptions inversely with higher unemployment rates.

The Federal Reserve adjusted the outlook about growth levels for this year where it is expected to shrink further reaching -1.3% to -2.0% during this year but expected to come back to the positive during next year reaching 2.0% - 3.0%.

On the other hand, unemployment levels for this year is expected to reach 9.2% to 9.6%, while next year the Fed's expect unemployment to reach 9.0% to 9.5%, as for inflation according to PCE indicator it is expected to rise to 0.6% - 0.9% this year, while it is expected to rise during the upcoming year to 1.0% - 1.6%, Finally the Fed's expect inflation to raise according to the Core PCE to rise by 1.0% - 1.5% this year and next year to range between 0.7% - 1.3%.

Ecpulse

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