FOREX TRADING

Fed releases FOMC meeting Minutes and New Projections for GDP, Unemployment, and Inflation

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 kept the borrowing costs at record lows among 0.0% – 0.25% to stimulate economic growth.

The Federal Reserve focused on the future outlook for the world’s leading economy, regarding the challenges that currently pose a threat to economical recovery such as Unemployment, inflation and growth outlook along with other major concerns about the performance of company’s especially financial institutions and the effect of tight credit conditions on markets.

Starting with the most important concern that has been agenizing investors and analysts around the world; high Unemployment, where the FED slashed its projections for the upcoming two years as FOMC members see unemployment even as it will stay “Quite Elevated” but dropping throughout the upcoming year as 2010 is considered a recovery year for the U.S economy.

The FED sees unemployment to range among 9.3% to 9.7% by the end of the fourth quarter of 2010 where it will continue to drop significantly throughout 2011 to range among 8.2% – 8.3% by end of the fourth quarter of 2011, in addition the FED sees gradual decline in unemployment throughout the year 2012 to range by the end of the fourth quarter of 2012 among 6.8% – 7.5 percent.

Elevated unemployment will remain the major player in markets throughout the upcoming two years where the FED projections about unemployment throughout this year were beaten by the current jobless rates as it stand on 26 year high at 10.2% where the FED has previously projected that unemployment rates to range among 9.6% – 10.1% by the end of this year.

As for inflation threats which has been rising over the past period due to the excess liquidity in markets the Federal Reserve released its projections for inflation rate to range among 1.3% – 1.6% throughout 2010 and drop throughout 2011 to range among 1.0% – 1.9%, in additions the Federal Reserve sees inflation rate to stabilize in 2012 between 1.2% – 1.9%, seemingly the Fed don’t see inflation as a risk throughout the upcoming two years knowing that the Federal Reserve favorable range for inflation is near 2.0 percent.

Inflation levels will threaten the economy over the long term as excessive liquidity in markets at the current period increased the money supply thus with tight credit condition that the FED noted in Minutes could threaten economical recovery and rise inflationary levels, not to mention rising oil prices which would pressure prices to rise over the upcoming period therefore I personally project that the FED will discuss the proper tools that should be used to withdraw the excessive liquidity from markets by the second third half of next year in order to meet the bank’s projections about inflation.

As for the declining value of Dollar, the Federal Reserve wary from falling dollar’s impact on inflation even as the decline in dollar is “Orderly” as described by the FED but will threaten economical recovery. Bernanke previously noted that FED policies supports stronger dollar therefore the outlook for inflation by FOMC members is roughly balanced as well.

The Federal Reserve also supplied the market with growth projections for the upcoming two years where the FED sees GDP growth to range among 2.5% – 3.5% in 2010, while rising in 2011 to range among 3.4% – 4.5% before stabilizing and initiate long term growth potentials throughout 2012 as the Federal Reserve sees growth in 2012 ranging among 3.5% – 4.8 percent.

The U.S economy released its revised reading for GDP for the third quarter of this year as it reached 2.8% from the previous reported estimate of 3.5% affected mainly due to the drop in personal consumption as it was revised lower as well, the FED assured markets that growth forecasts over the upcoming period is Roughly Balanced but strong over the upcoming two years.

As for the financial market the Federal Reserve sees continuous tightened credit conditions by banks along with low levels of inventories as manufacturers attempt to meet the current low demand in markets. But the overall trend of financial markets continues to support economical recovery.

The world’s leading economy is on the right track to recover from the worst financial crisis since the Great Depression where the Federal Reserve is trying its best to ensure the stability and stimulate growth throughout the upcoming years.

Finally FOMC members argued about the effects of asset sales as some the FOMC members saw asset sale could spur long term rate rise while several FOMC members saw asset sale useful to reduce balance sheet, but overall officials saw low rates may spur “Excessive” risk taking by firms.

Ecpulse

disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers’ opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk