Fed Lowers Expectations for Early Recovery

The Federal Open Market Committee's minutes of its March 17-18 meeting shows that the Federal Reserve policy-makers agreed that "substantial additional purchases" of a range of longer-term assets were needed to deal with a steep drop in economic activity across all sectors.

The minutes state the Fed's decision makers saw credit conditions remaining very tight, and financial markets remaining fragile and unsettled, with pressures on financial institutions generally intensifying in 2009. "Overall, participants expressed concern about downside risks to an outlook for activity that was already weak," the minutes state.

The Fed says the FOMC lowered projections for U.S. real gross domestic product in the second half of 2009 and 2010; however, the published minutes did not show revised figures.

The FOMC says these revisions reflect the steep job losses across nearly all sectors and contracting industrial production, and showed real GDP flattening out gradually over the second half of 2009 before slowly expanding in 2010 "as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through and the correction in housing activity comes to an end."

The FOMC said it planned to buy up to $300 billion of longer-term U.S. Treasury securities and an additional $850 billion of agency mortgage debt to ease a deepening domestic recession.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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