WASHINGTON (Thomson Financial) - The ongoing credit crunch has forced Federal Reserve governors and reserve bank presidents to drastically cut their real GDP growth projections for the US economy in 2008, although they still expect growth to rebound by 2010 to roughly the same level as 2007.
In its first three-year economic forecast released today, the Fed slashed its forecast for real GDP growth in 2008 to 1.80-2.50 pct, down from its June estimate of 2.50-2.75 pct.
"These revisions to the 2008 outlook since June stemmed from a number of factors, including the tightened terms and reduced availability of sub-prime and jumbo mortgages, weaker-than-expected housing data, and rising oil prices," the Fed said.
At the same time, the Fed cut its core inflation expectation for 2008 to 1.70-1.90 pct, down from 1.75-2.00 pct.
For the first time, the Fed made an estimate for headline inflation, which includes volatile food and energy prices that are removed from the core number. The Fed sees 2008 headline inflation at 1.80-2.10 pct.
Several economists and some Fed governors -- including Chairman Ben Bernanke himself -- have noted the increased risks that rising oil prices might pose to overall inflation, and some have said the Fed needs to add headline inflation to the data it monitors for this reason.
The Fed's specific expectations for GDP and inflation in 2008 are new, but largely in line with its more general pronouncements earlier this year that 2008 growth would be slower than 2007.
Despite the lower GDP predictions for 2008, the Fed made a slight upward revision to its GDP predictions for this year, to 2.40-2.50 pct from its earlier forecast of 2.25-2.50 pct.
The report also cut 2007 core inflation expectations to 1.80-1.90 from 2.00-2.25 pct. The Fed sees headline inflation this year in the range of 2.90-3.00 pct.
Looking beyond next year, the Fed says it sees both core and headline inflation in the range of 1.60-1.90 pct in 2010. Some economists have said the Fed's three-year inflation expectations could be seen as the Fed's target for inflation.
For growth, the Fed expects real GDP to rebound in 2009 to 2.30-2.70 pct, and then 2.50-2.60 pct in 2010. The Fed said it expects this growth to return as the housing market rebounds.
The forecast sees unemployment holding steady between 4.70 and 4.90 pct from 2007 to 2010. That's higher than the 4.25-4.75 pct range the Fed originally forecasted for 2007, and the 4.75 pct forecast for 2008.
The Fed earlier this month said its economic forecasts would extend to three years ahead, rather than the traditional two-year forecast.
The Fed's first three-year economic forecast included a new section outlining the perceived risks to the economic outlook, which said most Fed participants believe there are downside risks to the GDP outlook, mostly due to ongoing problems in the credit markets.
"The possibilities that markets could relapse or that current tighter credit conditions could exert unexpectedly large restraint on household and business spending were viewed as downside risks to economic activity," the report said.
It added that many are worried further economic weakness would lead to even tighter credit conditions and "slow the economy further."
The report said participants noted the risk of a "severe contraction" in the housing sector, but said the US economy "had proved quite resilient to episodes of financial distress," which suggests only a modest decline.
Elsewhere, the report said most participants believe there has been a modest decline in inflation this year, although they noted rising energy and commodity costs are a risk to this expectation.
Fed participants also said that the uncertainty surrounding their GDP forecast is "above typical levels in the past," although it said the uncertainty related to the inflation forecast was "broadly in line with past experience."
The Fed last week said it would provide an analysis on the level of uncertainty associated with these predictions, as part of its effort to bring transparency to its forecasts. In a separate paper released today, the Fed said "uncertainty about the economic outlook is considerable," but said that using a wide range of data allows predictions to be made with some certainty.
For example, it noted that about 70 pct of all historical outcomes have fallen within a one percentage point range of the predicted outcomes, and said looking at a wide range of forecasts therefore allows some certainty.
"Average differences in predictive performance across the forecasters in our sample are small, suggesting that we can use information gathered from a range of sources to help gauge the average magnitude of past uncertainty," the paper said.
The Fed noted that the uncertainty about real GDP growth in particular led to more diverse views among participants than there was in June. Differing views "seemed largely to reflect differing assessments of the likely depth and duration of the correction in the housing market," and other factors like whether the housing turmoil would spread to other sectors of the economy.
The Fed also noted differing views on where inflation is headed, in particular the question of whether inflation expectations are well-anchored in the US.
In its first three-year economic forecast released today, the Fed slashed its forecast for real GDP growth in 2008 to 1.80-2.50 pct, down from its June estimate of 2.50-2.75 pct.
"These revisions to the 2008 outlook since June stemmed from a number of factors, including the tightened terms and reduced availability of sub-prime and jumbo mortgages, weaker-than-expected housing data, and rising oil prices," the Fed said.
At the same time, the Fed cut its core inflation expectation for 2008 to 1.70-1.90 pct, down from 1.75-2.00 pct.
For the first time, the Fed made an estimate for headline inflation, which includes volatile food and energy prices that are removed from the core number. The Fed sees 2008 headline inflation at 1.80-2.10 pct.
Several economists and some Fed governors -- including Chairman Ben Bernanke himself -- have noted the increased risks that rising oil prices might pose to overall inflation, and some have said the Fed needs to add headline inflation to the data it monitors for this reason.
The Fed's specific expectations for GDP and inflation in 2008 are new, but largely in line with its more general pronouncements earlier this year that 2008 growth would be slower than 2007.
Despite the lower GDP predictions for 2008, the Fed made a slight upward revision to its GDP predictions for this year, to 2.40-2.50 pct from its earlier forecast of 2.25-2.50 pct.
The report also cut 2007 core inflation expectations to 1.80-1.90 from 2.00-2.25 pct. The Fed sees headline inflation this year in the range of 2.90-3.00 pct.
Looking beyond next year, the Fed says it sees both core and headline inflation in the range of 1.60-1.90 pct in 2010. Some economists have said the Fed's three-year inflation expectations could be seen as the Fed's target for inflation.
For growth, the Fed expects real GDP to rebound in 2009 to 2.30-2.70 pct, and then 2.50-2.60 pct in 2010. The Fed said it expects this growth to return as the housing market rebounds.
The forecast sees unemployment holding steady between 4.70 and 4.90 pct from 2007 to 2010. That's higher than the 4.25-4.75 pct range the Fed originally forecasted for 2007, and the 4.75 pct forecast for 2008.
The Fed earlier this month said its economic forecasts would extend to three years ahead, rather than the traditional two-year forecast.
The Fed's first three-year economic forecast included a new section outlining the perceived risks to the economic outlook, which said most Fed participants believe there are downside risks to the GDP outlook, mostly due to ongoing problems in the credit markets.
"The possibilities that markets could relapse or that current tighter credit conditions could exert unexpectedly large restraint on household and business spending were viewed as downside risks to economic activity," the report said.
It added that many are worried further economic weakness would lead to even tighter credit conditions and "slow the economy further."
The report said participants noted the risk of a "severe contraction" in the housing sector, but said the US economy "had proved quite resilient to episodes of financial distress," which suggests only a modest decline.
Elsewhere, the report said most participants believe there has been a modest decline in inflation this year, although they noted rising energy and commodity costs are a risk to this expectation.
Fed participants also said that the uncertainty surrounding their GDP forecast is "above typical levels in the past," although it said the uncertainty related to the inflation forecast was "broadly in line with past experience."
The Fed last week said it would provide an analysis on the level of uncertainty associated with these predictions, as part of its effort to bring transparency to its forecasts. In a separate paper released today, the Fed said "uncertainty about the economic outlook is considerable," but said that using a wide range of data allows predictions to be made with some certainty.
For example, it noted that about 70 pct of all historical outcomes have fallen within a one percentage point range of the predicted outcomes, and said looking at a wide range of forecasts therefore allows some certainty.
"Average differences in predictive performance across the forecasters in our sample are small, suggesting that we can use information gathered from a range of sources to help gauge the average magnitude of past uncertainty," the paper said.
The Fed noted that the uncertainty about real GDP growth in particular led to more diverse views among participants than there was in June. Differing views "seemed largely to reflect differing assessments of the likely depth and duration of the correction in the housing market," and other factors like whether the housing turmoil would spread to other sectors of the economy.
The Fed also noted differing views on where inflation is headed, in particular the question of whether inflation expectations are well-anchored in the US.
Aucun commentaire:
Enregistrer un commentaire