Current State of US Economy: Key Highlights from the Fed Meet

GDP is likely to continue to grow throughout 2013 and 2014, but at a slower than earlier expected. Unemployment to decline gradually, but it will still remain uncomfortably higher. Fed says it won’t hesitate to provide additional support to the economy if required. They will be closely monitoring inflation and unemployment situation.

Current Inflation Scenario & Future Outlook

Inflation to remain close to 2% target rate. Bernanke says Core inflation a little stronger than expected. Bernanke also said that seeking higher inflation rate would be reckless under current economic scenario. He added that gas price impact on inflation should be temporary. On the whole the economic fundamentals project a low inflation outlook.

Fed Fund Rates: When will the Federal Reserve Act?

Fed Fund Rates to remain low till late 2014. If data comes stronger than expected then the Fed may respond early. Fed is too cautious, that a general sentiment! Bernanke believes that FOMC has been aggressive in easing monetary policy. Bernanke still holds the view that keeping interest rates lower is important for the economic recovery.

Other Takeaways from Bernanke’s Speech

Bernanke says that Federal Reserve is working on becoming more transparent, so that average people can better understand their working.

Fiscal situation still poses significant threat to U.S economy.

US has avoided deflationary scenario, and right now the US banking system is considerably stronger than it was few years back.

What is Bernanke worried about the most?

Recovery has been quite slow and the unemployment rate is still high. The pace of improvement in the labor market is what frustrates Bernanke the most.

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