The US Federal Reserve this week releases its updated economic forecast likely to show tepid growth for most of this year but probably not a recession, thanks to rate cuts and a big stimulus effort.
The forecast set to be released today along with minutes of the Fed's Jan. 30 to Jan. 31 monetary policy meeting is part of a new policy set by Chairman Ben Bernanke to provided more frequent economic updates.
Bernanke told a congressional hearing last week that the forecast would be lower than the forecast released late last year of a range of 1.8 percent to 2.5 percent growth on average for the year.
He told the Senate Banking Committee a US$168 billion economic stimulus plan, which aims to boost consumer and business spending, would help lift growth later this year.
"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt," Bernanke said.
In response to a question, Bernanke said the Fed would release its new economic outlook that "will show lower projections of growth, and they'll be reasonably consistent with what we're seeing with private forecasters."
Societe Generale economist Stephen Gallagher said he expects a year-over-year growth rate of 1.2 percent to 1.6 percent for GDP, which "would be consistent with private forecasts and forecasts of the CBO [Congressional Budget Office]."
He said that even though many private economists are predicting a recession -- generally seen as two consecutive quarters of declining activity -- he does not see the Federal Open Market Committee (FOMC) making such a forecast.
"Even FOMC members at the weak end of expectations in the October 2007 forecasts might be reluctant to now officially forecast a negative GDP reading, even if they make downward revisions," Gallagher said.
Yet the latest Fed forecast -- which was provided to policymakers last month -- may be stale since it did not take into account the impact of a stimulus plan, some analysts said.
The Congressional Budget Office last week upgraded its outlook to show 1.9 percent growth this year from 1.7 percent, while lowering its projection for next year to show 2.3 percent expansion instead of 2.8 percent.
The shift is expected because some consumer and business spending will be drawn this year due to the impact of the stimulus plan. Another factor is the Fed's aggressive rate cuts, which have brought the base federal funds rate to 3 percent from 5.25 percent last September.
Economist Ethan Harris at Lehman Brothers said that the stimulus will provide a chopppy impact.
"We look for a W-shaped trajectory in GDP growth with the economy threatening recession in early 2008 and early 2009. However, we still think the economy will skirt recession due to timely monetary and fiscal policy," he said.
Other analysts say it may be too late to prevent a recession.
"Market hopes are pinned on the fiscal stimulus package giving the economy enough of a lift to avert a recession," Merrill Lynch economist Sheryl King said.
"Unfortunately, in spite of the breathtaking speed at which Congress managed to push the proposals though both chambers and onto the president's desk for signing, the swath of indicators we saw this week tell us that the ship has probably already sailed," she said.
"By our estimations we are probably at least a couple of months into the downturn," she said.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS