Wednesday, August 18, 2010

Growth expectations

Not good
Here, the forecast for 2010:Q3 takes an alarming drop, going from a forecast of about 4.50% growth in May to a forecast of 3.24% in August.  The Fed, therefore, has allowed NGDP forecasts to fall by 1.26% over these two quarters.  Does that make any sense in the current economic environment?   Does the Fed not realize that by passively allowing such developments it is effectively tightening monetary policy?

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