Fed (correctly) lowers expectations on jobs
The Fed just did what a lot of forecasters have done already: lowered its economic forecast for the US economy over the next couple of years.聽 Back in June, they thought the 2012 jobless rate would be about 8%.聽 they鈥檙e thinking about 8.5%.
I suspect the Fed will get some criticism for trotting out a worse forecast without announcing that they planned to do anything more about it.聽 That鈥檚 a fair critique鈥攖hey should do more (and kudos to Fed governor Charles Evans for dissenting on behalf of that point鈥攈is is the first Fed dissent on behalf of doing more for growth since 2007).
But I also think Fed chair Bernanke has a good point:
鈥淚 think it would be helpful if we could get assistance from other parts of the government to help create more jobs.鈥�
As per the , Bernanke 鈥渄rew a contrast between the Fed鈥檚 actions and the performance of Congress and the president in addressing the nation鈥檚 unemployment crisis.鈥�
Evans is right, but at least Ben鈥檚 doing something, and getting results in terms of keeping interest rates low.聽 But as I鈥檝e argued , I think sequencing matters here.聽 聽Consumers and investors won鈥檛 respond to low rates absent more demand from the fiscal side.聽 To get some traction on monetary policy, Congress needs to pass some new fiscal policy.
