Guess What The Fed's Original 2013 GDP Forecast Was

For some reason, today pundits are appalled by the loss of Fed credibility only because Bernanke "surprisingly" U-turned on the taper announcement, catching virtually everyone offguard. Perhaps instead of that, the sophisticated financial community should focus on the core of the problem: the Fed's chronic inability to look even more than a couple of years into the future without being dead wrong about what transpires, even in the absence of a great financial crisis (which the Fed never could predict in the first place of course). Case in point, yesterday's most recently downward 2013 GDP projection. The chart below tracks how the latest and greatest prediction of the 2.15% 2013 GDP (2.0%-2.3%) moved over the past two years.

From Guggenheim's Scott Minerd:

"Since the U.S. Federal Reserve first began to release economic projections three years ago, it has consistently downgraded its outlook. In the latest Federal Open Market Committee meeting, the Fed further lowered its projections for GDP growth in 2013 to an average of 2.15 percent, compared with an average of 4.15 percent from its initial projections in January 2011."

In other words, the Fed started at 4.2%... and ended with half that number. Oh, and that includes the recent GDP-boosting revision, without which GDP growth for the year would have been even lower.

Yet people are somehow still arguing and debating about Ben Bernanke's "credibility."