The Fed doesn’t except growth to turn negative this year.
But statements in the minutes from the December meeting of the Federal Open Market Committee indicate that officials are growing more concerned about a slowdown, and are examining whether their own policies are exacerbating the downside risks ahead.
The meeting summary noted that one of the dangers to the longer-run outlook is “greater-than-expected negative effects from the monetary policy tightening to date.”
“What people don’t seem to get is that monetary policy hits the economy with a time lag,” David Rosenberg, chief economist and strategist at Gluskin Sheff, said in his daily market note Thursday. “But the Fed actually does realize this and is becoming more vocal about the prospect that it has already overtightened.”
Even though investors are happier with the more dovish tone, Rosenberg warned that it could be a prelude to longer-term problems.
“The Fed will be forced to ease policy before too long, and is moving incrementally in that direction. But as is often the case, they are far too late,” he said. “The lags. This is what the consensus economics community seems to be missing, which is why it has never accurately called for a recession, even when it was starting. Read what many were saying in early 2001 and 2008 and you will see what I mean.”
“After reading the dovish tone of the minutes, one is left wondering why the Dec. 19 rate hike was even necessary,” Rosenberg added.
from Viral News Reports http://bit.ly/2SMGVBH
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