On that score, Atlanta Fed President Jack Guynn said yesterday that the adjustments in the economy should be completed by mid-year, paving the way for "healthy growth." Guynn added that the Fed had room to lower rates if needed (a full 175 basis points more room, in fact).
Today Philadelphia Fed President Anthony Santomero threw his hat in the mid-year recovery ring, with growth "slower than usual" for a recovery period.
Who can take issue with the consensus forecast? Housing and auto purchases, the two traditional cyclical leaders, are already booming, the former spurred by low mortgage rates, the latter by zero percent financing.
Manufacturing shows signs of coming out of a long dark slumber following a huge draw down in inventories. Given the overhang in technology, however, forecasters aren't too optimistic about a boom.
Then there's the rest of the world, which followed the US.
into recession if it wasn't there already (Japan).
So where's the growth going to come from? It's hard to see, which is why no one expects a typical post- recession boom.
What if they're wrong? When should we expect the Fed to start raising rates? If history is any guide, shortly after the central bank stops cutting them. With the exception of the 1990-1991 recession, the Fed has turned on a dime, raising rates one month after lowering them, according to Peter Hooper, chief economist at Deutsche Bank.
Most analysts are convinced that the current recovery will be akin to the post-1990/1991 "jobless recovery," where the economy took its sweet time kicking into gear. The Fed waited 14 months after the last easing before raising rates.
There is one difference between then and now: the banking system. Despite aggressive Fed ease -- almost 700 basis points -- from 1989 through 1992, growth in the broad monetary aggregates was the weakest in the official history of the data going back to 1960. Banks were saddled with bad loans and had to improve their capital-to-asset ratios to comply with international standards. In other words, they couldn't lend.
That's not the case now. The banking system is healthy, as is money-supply growth. All the money being printed by the Fed will have to go somewhere: either into goods and services or asset prices (Bubble II?). With everyone, including policy makers, leaning in the same direction, my guess is that if there's going to be a surprise it will be stronger, not weaker, growth.
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