Today’s press conference is likely to be a more difficult experience for Fed Chairman Ben Bernanke than last month, because there’s way more uncertainty about the economic outlook and future Fed policy than there was just a month ago, according to Goldman Sachs.
Goldman projects three ways we should expect Fed language to change today.
- “Growth slowdown not so transitory”: Bernanke will admit that the current growth slowdown is not just the result of transitory factors, but rather do to some underlying trends. The Fed will revise down its 2011 GDP growth projection to 2.7% from 3.2%.
- “Core inflation picking up”: Expect little change in Fed language on this issue, but an acknowledgment that core inflation is picking up, through a 0.1% increase in its inflation projections for 2011 and 2012.
- “Policy in ‘zone of inaction'”: The Fed remains in a position in which there will be no action for sometime. Language around how long that time period may become more specific, with Bernanke specifying an “extended period” means “at least a couple of meetings.”
In conclusion, don’t expect much but some minor revisions to the Fed’s outlook for 2011 and 2012.
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