Structural reform underway for financial institutions…
-recovery was weaker than previously thought
-recession was stronger than previously thought
-some of the weakness is temporary factors and effects of Japan’s crisis
-FOMC expects slower recovery
-contributing factors is unusually weak consumer spending, high unemployment, slow wage gains, high debt burdens, and slumping home prices…
-households are extremely cautious
-business sector presents a more upbeat picture with the trade deficit shrinking
-commercial real estate has suffered loan problems and vacancies
-why is the recovery slow and erratic ?
-generally recoveries experience pent up demand providing impetus to business and household spending
-normally these conditions allow the process of recovery to gain momentum
-unfortunately the global recession was plagued by a slumping housing market and a banking problem which has remained to stress the health of recovery….
-depressed construction and home building has restrained the housing market effecting other industries
-the financial crisis sparked the global recession…while reform continues financial stress has become a drag on recovery by placing volatility and liquidity problems for global economy
-current financial stress is restraining growth through confidence erosion
-with absence of demand from the private sector could add to a slowing of the recovery
-finances of the federal government will spiral out of control due to commitments in social security and healthcare
-acting now to put in place fiscal policy to curb deficit spending will add to the health of the country overall
-production fell with the crisis in Japan and inflation has crept up….inflation is expected to moderate as prices have leveled off and come down from their highs.
-resource slack should have a moderating influence on inflation
-unit labor cost remain at similar levels since the beginning of the crisis and moderating labor costs should help to curb inflation
-Jackson Hole’s meeting influenced the Fed to keep interest rates low for several years and the Fed has a range of tools to help the recovery.
-we will employ those tools as necessary to create price stability…..
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