ECONOMY - Full Recovery Years Away?

"Fed Signals That a Full Recovery Is Years Away" By BINYAMIN APPELBAUM, New York Times 1/25/2012

Excerpt

The Federal Reserve, declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to spur growth.

The Fed said that it now planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers.

The economy expanded “moderately” in recent weeks, the Fed said in a statement released after a two-day meeting of its policy-making committee, but jobs were still scarce, the housing sector remained deeply depressed and Europe’s flirtation with crisis could undermine the nascent domestic recovery.

The Fed forecast growth of up to 2.7 percent this year, up to 3.2 percent next year and up to 4 percent in 2014, but at the end of that period, the central bank projected that the recovery would still be incomplete. Workers would still be looking for jobs, and businesses would still be looking for customers.

“What did we learn today? Things are bad, and they’re not improving at the rate that they want them to improve,” said Kevin Logan, chief United States economist at HSBC. “That’s what they concluded — ‘We’ve eased policy a lot, but we haven’t eased it enough.’ ”

The economic impact of the low-interest rate extension, however, is likely to be modest. Many businesses and consumers can’t qualify for loans, a problem the Fed’s efforts do not address. Moreover, long-term rates already are at record low levels and, like pushing on a spring, the going gets harder as it nears the floor. Finally, the Fed already was widely expected by investors to hold rates near zero well into 2014, limiting the benefits of a formal announcement.

“I wouldn’t overstate the Fed’s ability to massively change expectations through its statements,” the Fed’s chairman, Ben S. Bernanke, said at a press conference Wednesday after the announcement. “It’s important for us to say what we think and it’s important for us to provide the right amount of stimulus to help the economy recover from its currently underutilized condition.”

The Republicans, in full control of our federal government, took 8yrs to dig our economy into this hole. Surprise, surprise it will take longer than 2yrs to fill in that hole.