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Fed Slashes Growth Outlook, Six Fed Officials Do Not See Rate Hike Until 2015

Tyler Durden's picture




 

This is just getting better and better:

  • FOMC: 2012 GROWTH AT 2.2%-2.7% VS 2.5%-2.9% IN NOV. FORECAST
  • ELEVEN OF 17 FED OFFICIALS SEE MAIN RATE ABOVE 0.25% IN 2014
  • SIX OF 17 FED OFFICIALS SEE NO RATE INCREASE BEFORE 2015
  • FOMC DOESN'T SET SPECIFIC LONG-RUN GOAL FOR EMPLOYMENT LEVEL

Japan is now seriously blushing. As for the reality of the Fed's forecasts, they are absolutely worthless, so no point in even spending one minute on them. 

Furthermore, the Fed, contrary to some misunderstanding, is not engaging in inflation targeting with endless QE until said inflation is achieved. It is merely saying what it predicts the inflation rate should be (modest difference). Of course, at 2%, we know just where inflation will never be - this is after all the Fed.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.

Yet here is the funniest chart: the "longer run" fed funds rate.

Uh...if you keep ZIRP until 2015, we are going to have a 100% FF rate in 2016. Because what the Fed is doing is setting the stage for the biggest, and finally last, credit bubble in the history of the world.

Fed SEP

 

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Wed, 01/25/2012 - 15:07 | 2097080 Dr. Engali
Dr. Engali's picture

2015 we aren't going to last that long. Nobody can buy the amount of paper we need to sell.

Wed, 01/25/2012 - 15:12 | 2097112 Silver Bug
Silver Bug's picture

Wow I highly doubt the US Dollar will make it until 2015 at zero percent interest rates. Hyper inflation here we come!

 

http://ericsprott.blogspot.com/

Wed, 01/25/2012 - 15:14 | 2097124 Popo
Popo's picture

Bernanke understands his predecessor well.  He'll retire long before 2015.   Just unleash the stimulus genie, and quickly take your bows.  Then run for the hills and feign age-related memory loss. 

Fuck you Bernanke.  The world knows you failed.

Wed, 01/25/2012 - 15:50 | 2097287 Chief KnocAHoma
Chief KnocAHoma's picture

Wait one damn mintue... Obama told me last night the State of our Union was getting stronger and we had turned the corner.. didn't the Fed governors see him dance on the Lezbo Ellen show? Don't they know his speechs can heal broken markets? Man these dudes are dumb.

Glad we have Hussein in the White House to straighten all this out...

Wed, 01/25/2012 - 16:10 | 2097382 trav7777
trav7777's picture

and gold is promptly apeshit

There is no demand for credit even at 0%.  This should tell everyone something, but apparently economists can't get it.

Wed, 01/25/2012 - 17:43 | 2097814 Kali
Kali's picture

I can't wait til people start openly laughing when any of them give speeches.  Just like the Chinese did to Timmay!

Wed, 01/25/2012 - 17:11 | 2097641 John Law Lives
John Law Lives's picture

Since when have Fed Chairman pre-announced their intentions re. monetary policy several years in advance.

This move wreaks of desperation.  The Fed is subsidizing Congress by allowing them to pile on new debt through reckless deficit spending.  It is a sure path to destruction.

Wed, 01/25/2012 - 23:12 | 2098657 The Monkey
The Monkey's picture

Agreed.  The Fed has failed.  The government in general was never straightforward with the American public.  Most likely, they listened to the people that had answers to their liking.  Obama has not said anything that would shake confidence and increase consumer saving.  To the contrary, consumers went balls to the wall in Q4 in a year where household income declined 3% and savings again dipped into the 3% range.  No matter what the Fed does, this is a mean reverting series and tends to overshoot.  There is no way to stop what is coming.  A massive output gap, consumer retrenchment and deflation.

 

Wed, 01/25/2012 - 22:32 | 2098543 Buck Johnson
Buck Johnson's picture

We won't and the dollar won't either.  We are buying our own paper and we are seeing inflation increasing and increasing by the month, especially in food and other items that people use everyday.  We will see hyperinflation, and when that happens all hell will break loose in the US, that is why they are increasing the power of the state and govt..  Because they know that our populace has been dumbed down and made complacent (most not all) as long as they get their checks.  But when those checks don't come and/or they can't buy a gallon of milk, they will go insane with rage.

Wed, 01/25/2012 - 16:05 | 2097366 stocktivity
stocktivity's picture

...and the market rockets higher on the news

Wed, 01/25/2012 - 15:08 | 2097081 Cognitive Dissonance
Cognitive Dissonance's picture

I just love it when the clown circus is in town.

I thought everything was already fixed good as new?

Wed, 01/25/2012 - 15:10 | 2097099 SHEEPFUKKER
SHEEPFUKKER's picture

Any chance a few more sheeple wake up when the Fed spews more nonsense?

Wed, 01/25/2012 - 15:07 | 2097082 GeneMarchbanks
GeneMarchbanks's picture

'Uh...if you keep ZIRP until 2015, we are going to have a 100% FF rate in 2016. Its called the biggest credit bubble in the history of the wsorld.'

Scorched Earth policy.

Wed, 01/25/2012 - 15:07 | 2097083 drink or die
drink or die's picture

Should have a balanced budget by 2014, right...right? 

Wed, 01/25/2012 - 18:09 | 2097904 Hobbleknee
Hobbleknee's picture

Don't forget, all the fake budget reductions were based on +6% growth every year for the next decade.  O_O

Wed, 01/25/2012 - 15:08 | 2097084 nudlee
nudlee's picture

"Fight Club was the beginning, now it's moved out of the basement, it's called Project Mayhem."

Wed, 01/25/2012 - 15:21 | 2097159 Conrad Murray
Conrad Murray's picture

This is relevant to my interests. Homework ideas? Maybe leave some infected USBs marked "Celeb XXX 2012" lying around Midtown or in front of Squid HQ? Follow a few squid home and add to the growing list of d0x?

Wed, 01/25/2012 - 15:51 | 2097307 Chief KnocAHoma
Chief KnocAHoma's picture

Dude you are NOT supposed to talk about fight club.

Wed, 01/25/2012 - 15:08 | 2097085 ABG LINE
ABG LINE's picture

"LOLR"

Wed, 01/25/2012 - 15:08 | 2097087 Irish66
Irish66's picture

I thought I was prepared but this is insanity, kukoos nest.

 

Wed, 01/25/2012 - 15:08 | 2097088 ZeroPower
ZeroPower's picture

ZIRP till 2015 now? Easy credit FTW. 

Wed, 01/25/2012 - 15:10 | 2097089 The trend is yo...
The trend is your friend's picture

gld...180...shortly

Wed, 01/25/2012 - 15:13 | 2097110 GeneMarchbanks
GeneMarchbanks's picture

slv... 180...shortly*

 

*fixed at no charge.

Wed, 01/25/2012 - 15:37 | 2097242 Manthong
Manthong's picture

If this market does a Granville, the metals will tank to a degree again before parting company with equity and resuming the ascent towards the heavens.

Wed, 01/25/2012 - 15:11 | 2097090 asteroids
asteroids's picture

What a fucking disaster. The FED doesn't think things will improve until at LEAST 2015. And the market rallies in response??? This is hell.

Wed, 01/25/2012 - 15:14 | 2097121 Everybodys All ...
Everybodys All American's picture

What they really wanted to say was we have no clue when things will get better or if they ever will but that wouldn't play well in the media or for Obama's re-election.

Wed, 01/25/2012 - 15:20 | 2097154 Cpl Hicks
Cpl Hicks's picture

Welcome to hell

Lost your "Hope & Change" button? So sorry. Here's the new 2012 version.

Oh, I pinned it thru your skin? I meant to do that.

Wed, 01/25/2012 - 15:27 | 2097196 TheMerryPrankster
TheMerryPrankster's picture

Essentially it means depression until 2022/2024. The FED can only 'see' until 2015 and sees nothing improving until then.

Extrapolate how many new jobs need to be created to employ the jobless and the newly graduating and multiply by current job creation rates. Full (5%) employment won't occur until the late teens, 2017 perhaps and that would be based on a increasing employment trend with no intermixed recessions/depressions appearing in the meantime.

The international oil agencies feel there will be a progression of the downside of the peak oil plateau around 2014-2016 according to their data. That means higher oil prices and higher food prices, less disposable income and more unemployment.

Demographics say more baby-boomers retiring and spending less, since many will be living on social security alone. That won't cause an increase in spending and may not help unemployment since they will need to supplement their income because of inflation and higher oil prices.

Unless we get some breakthrough technology in the next few years that causes massive growth in some sectors and reduces the cost of oil, we are stuck in park and the emergency brake doesn't work as we continue to drift sideways and downhill with no one at the steering wheel.

The future remains a place of great caution where it is easier to lose a fortune than make one.

 

Wed, 01/25/2012 - 16:00 | 2097348 walküre
walküre's picture

I'm less pessimistic. 2018/2019 is my prediction before they're making real moves. There will be war between now and then as well. The stage is being set.

Wed, 01/25/2012 - 16:26 | 2097472 TheMerryPrankster
TheMerryPrankster's picture

I agree on the war/police action. I'm being optimistic, worst case ain't pretty.

I think there are 4 major factors at work in controlling our destinies.

1.debt/financial fraud - global problem

2.peak oil - global problem

3.demographics - u.s, western europe,china,japan problem

4.technology - no quantum leap, must have technologies to drive growth and secondary markets- u.s, canada,western europe problem.

We might get lucky and crack one or two of these, but that still leaves 2 major problems that are irresolvable.

of course there could be many more problems should our aging nuclear reactors flake out ala fukushima, or any of a host of terrible problems like earthquakes, tsunamis and power grid failures. I work with the problems I can see, and I wish the view were better.

 

Wed, 01/25/2012 - 15:09 | 2097091 Timmay
Timmay's picture

At some point these guys will realize we don't give a shit what they say anymore.

Wed, 01/25/2012 - 15:12 | 2097111 baby_BLYTHE
baby_BLYTHE's picture

When they destroy the currency, the FED will end itself. Today was the final nail in the dollar's coffin. All credability will be lost when the dollar quits working.

Wed, 01/25/2012 - 15:16 | 2097130 GeneMarchbanks
GeneMarchbanks's picture

$ quit working long ago.

Wed, 01/25/2012 - 15:29 | 2097203 NotApplicable
NotApplicable's picture

Not for the zombie banksters.

Wed, 01/25/2012 - 15:31 | 2097214 I Got Worms
I Got Worms's picture

Have I just been smoking too many banana peels, or does the Mayan calander reset AND the Federal Reserve's charter both expire on 12/21/12?

 

"One in a million, doc!!" /Frank Castanza

Wed, 01/25/2012 - 15:40 | 2097254 baby_BLYTHE
baby_BLYTHE's picture

I've brought this up on ZH before and the consensus on here seems that somehow the Federal Reserve Act was modified sometime in the 1970s that removed the language containing the expiration date of the charter. If that is indeed true, the FED became an arm of the government overnight without a whimper nor vote from the people... never mind the Constitution (law of the land) that has no authority for a private central bank. They got away with it when they removed the dollar's last link from gold in 1971, from that date they knew they would need the FED in place to print to infinity.

Wed, 01/25/2012 - 16:31 | 2097499 TheMerryPrankster
TheMerryPrankster's picture

That explains the birth of electronic commerce, otherwise we'd have to cut down all the trees just to make paper.

The Federal Reserve saving the planet from global deforestation, one tree at a time. - a future FED commercial perhaps?

Wed, 01/25/2012 - 15:09 | 2097092 evolutionx
evolutionx's picture

HYPERINFLATION WILL DRIVE GOLD TO UNTHINKABLE HEIGHTS

We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments.  Thus most of these assets are also worth-less.

 

So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit.  There is no longer a question of IF it will happen but only WHEN and HOW.  The world lives in blissful ignorance of this. Stockmarkets remain strong and investors worldwide have piled into government bonds in a perceived flight to safety. Due to a century of money creation (and in particular since the 1970s) by governments and by the fractal banking system, investors believe that stocks, bonds and property can only go up. Understanding risk and sound investment principles has not been necessary in these casino markets with guaranteed payouts for anyone who plays the game. Maximum leverage and derivatives have in the last 10-15 years driven markets to unfathomable risk levels, with massive rewards for the participants.

 

More:

http://www.mmnews.de/index.php/english-news/7063-hyperinflation-will-drive-gold-to-unthinkable-heights

Wed, 01/25/2012 - 15:09 | 2097093 Let them eat iPads
Let them eat iPads's picture

ZIRP has been extended to the year 2525.

If man is still alive.

Wed, 01/25/2012 - 15:29 | 2097201 andybev01
andybev01's picture

Now you did it...

 

http://www.youtube.com/watch?v=1FgSmdfRUus

 

It will take all freakin' day to get that out of my head.

Wed, 01/25/2012 - 16:55 | 2097564 Elwood P Suggins
Elwood P Suggins's picture

Does ZIRP stand for Zero In on Ron Paul by any chance?

Wed, 01/25/2012 - 15:09 | 2097097 fonzannoon
fonzannoon's picture

This is a death sentence if you are a fixed income trader. My fixed income trader support meeting is going to be packed tonight.

Wed, 01/25/2012 - 15:11 | 2097104 Everybodys All ...
Everybodys All American's picture

No kidding...

Wed, 01/25/2012 - 15:17 | 2097136 hack3434
hack3434's picture

Easy to solve....lever up 500x and that 1% yield means something. I'm maxing out my CC to buy them treasuries. 

Wed, 01/25/2012 - 15:11 | 2097102 walküre
walküre's picture

Curious to see what the reaction in the BDIY will be overnight. If it keeps plummeting, I'd stay out of equities despite ZIRP4EVA. If it catches a few bids and comes back above $1000 we might live to see another day.

Oh, and FYI Greece will default and leave the Eurozone. Done deal. Euro is expected to come back to $1.40 by this summer.

Muddle thru.

Wed, 01/25/2012 - 15:12 | 2097105 DionysusDevotee
DionysusDevotee's picture

So...More silver then?

Wed, 01/25/2012 - 15:13 | 2097109 Eally Ucked
Eally Ucked's picture

Ha,ha they don't have goal for employment "FOMC DOESN'T SET SPECIFIC LONG-RUN GOAL FOR EMPLOYMENT LEVEL" how would they do it anyway, start their own business in printing industry?

Wed, 01/25/2012 - 15:13 | 2097117 Dr. Engali
Dr. Engali's picture

Yeah I wonder what 4% longer rates do when we have  20 trillion in recognized debt in four years. I'm sure that will work out well.

Wed, 01/25/2012 - 15:14 | 2097119 fonzannoon
fonzannoon's picture

I think this rally gets faded quick as people start realizing exactly what is being admitted today....which is that we are fked.

Wed, 01/25/2012 - 15:14 | 2097123 TheSilverJournal
TheSilverJournal's picture

Don't worry, recovery is right around the corner...riiiigght after mid 2013..err, after 2014. Oh, and housing is bottoming right now..again. And that balancing the budget thingy..we'll get to that right after the rocovery occurs. / sarc (actually I don't even here them even try to lie about balancing the budget anymore)

TheSilverJournal.com

Wed, 01/25/2012 - 15:17 | 2097125 AC_Doctor
AC_Doctor's picture

The FED people will be swinging like windchimes before 2015, which may alter their current future projections.  So when is the market going to sell the news? Oh yeah, isn't Binkie Bennie going to be grilled any minute now, or are all the questions going to be slow pitch softballs.

Wed, 01/25/2012 - 15:15 | 2097127 homer8043
homer8043's picture

Given that chart and the Fed's implied definition of long run, the quote at the top of this web site is appropriate.

Wed, 01/25/2012 - 15:16 | 2097131 apu123
apu123's picture

Some awesome reporting from CNBCialis, and I quote "Stocks erased their early gains to turn higher Wednesday"  Nice job guys!

Wed, 01/25/2012 - 15:18 | 2097143 walküre
walküre's picture

Shows that they can't keep up. Don't blame them. The pre-programmed pre-packaged news outlets probably weren't anticipating the ZIRP extension today.

Wed, 01/25/2012 - 15:19 | 2097152 Jerry Maguire
Jerry Maguire's picture

It's just Japan redux.  Death by a thousand cuts.  Drag it out for decades and hope no one will notice they're being poisoned.

Debt is the poison and we have to get rid of it.  We can, but we need the political will to do it.

http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-ed...

http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-ed...

http://strikelawyer.wordpress.com/2011/12/31/brief-history-of-jubilees/

 

Bonus question:  how can this idea fund the government AND limit or eliminate fractional reserve banking:

http://strikelawyer.wordpress.com/2012/01/03/seigniorage/

Wed, 01/25/2012 - 15:23 | 2097153 CrashisOptimistic
CrashisOptimistic's picture

>>

As for the reality of the Fed's forecasts, they are absolutely worthless, so no point in even spending one minute on them.

>>

 

What's amusing about this is every single financial institution has its own economics department, paying people to create models from which to make projections of GDP.

Every goddamn one of them is worthless.  It's the most worthless profession on the planet.

Wed, 01/25/2012 - 15:22 | 2097163 GernB
GernB's picture

Apparently it is lost on the investimg community that if they are keeping the rate that low that long it is for a reason. That reason is fear of deflation.

Of course, the market reaction is: hey the Fed is concerned about deflation, so lets all run out and buy investments that are hurt by deflation. Makes perfect sense to me.

Wed, 01/25/2012 - 15:24 | 2097176 CrashisOptimistic
CrashisOptimistic's picture

This is not about investing.  

This is about dying.  Why can they not see that it's not working.  Non sugar based growth is NOT HAPPENING.

They are going to destroy everything, and they'll act surprised when it happens.

Wed, 01/25/2012 - 15:23 | 2097164 spastic_colon
spastic_colon's picture

Would be a lot more effective if they back tested the projections in the pretty graphs in the actual report.....otherwise these are dumb

Wed, 01/25/2012 - 15:31 | 2097215 FoieGras
FoieGras's picture

Highly deflationary for the intermediate term. More of the same. Sub-par growth. Negative interest rates. No hyperinflation anytime soon boys. Maybe in 2030.

Wed, 01/25/2012 - 15:32 | 2097224 James-Morrison
James-Morrison's picture

Jawboning the market. 

Yet another futile attempt to keep the monetization trap door open as long as possible...

and then we implode.

At least we now have a stable date, until we get another one.  

Wed, 01/25/2012 - 15:50 | 2097305 AmazingLarry
AmazingLarry's picture

How many maxed out with silver bullion JPM CC's is considered "normal" in 2012, anyhow?

 

 

Wed, 01/25/2012 - 16:00 | 2097347 RmcAZ
RmcAZ's picture

$1707

Wed, 01/25/2012 - 16:11 | 2097389 slackrabbit
slackrabbit's picture

what 2015 really means" if it doesn't crash before 2015, we'll cross our fingers.....well until the president says otherwise"

 

Wed, 01/25/2012 - 16:17 | 2097423 EyeQ
EyeQ's picture

Don't you see, with all the government debt, if they can lower the interest rates into negative territory, they actually MAKE money on what they borrow????

Wed, 01/25/2012 - 16:18 | 2097428 trillion_dollar...
trillion_dollar_deficit's picture

When in doubt, just refer to my avatar.

Wed, 01/25/2012 - 16:21 | 2097443 quacker
quacker's picture

When an anvil falls on someone's head you can expect serious injury or death.

When an anvil falls on someone's head in Cartoon Land, maybe the person scrunches up like an accordian, or maybe opens his mouth and swallows the anvil and his body buldges out to the shape of the anvil.

Point being, when an anvil falls in Cartoon Land, it has whatever effect the central planners and manipulators of the animation want it to have.

Little growth until at least 2015 is an anvil. And it did fall. But it fell in Cartoon Land.

Wed, 01/25/2012 - 16:33 | 2097504 ucsbcanuck
ucsbcanuck's picture

"Little growth until at least 2015 is an anvil. And it did fall. But it fell in Cartoon Land."

Classic!

Wed, 01/25/2012 - 16:48 | 2097546 Citxmech
Citxmech's picture

Yeah - but at some point Wile E. Coyote is going to look down.

Wed, 01/25/2012 - 17:06 | 2097531 Buyemall
Buyemall's picture

2013 was omitted alright..

Wed, 01/25/2012 - 17:59 | 2097868 Rathmullan
Rathmullan's picture

How can bubble boy ben promise ZIRP through 2014 when he will be gone very early (by Feb.) in 2014?  

Wed, 01/25/2012 - 19:12 | 2098073 EmileLargo
EmileLargo's picture

Faber said they would do this back in 2008. This and the ridiculous deficits. They will use dollars for their morning duties shortly. 

Wed, 01/25/2012 - 21:34 | 2098409 BlackholeDivestment
BlackholeDivestment's picture

...Why is Washington D.C. not burnt to the gound after such an offer? Oh yeah, it's only 2012, lol, just a bit early for that yet. Lol. Fear not, that hour shall come upon this generation, the numbers are in. Lol. http://www.youtube.com/watch?v=LQEgZNqa8jE

Wed, 01/25/2012 - 23:59 | 2098739 gwar5
gwar5's picture

If nominal growth is 2.2%, but real inflation per Shadowstats is 6.3%, isn't real growth more like negative 4.1%? Sure feels like it is negative, and why would the FED even think about QE if real growth is positive? The Davos crowd is scared.

 

 

 

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