Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (44809)	5/22/2008 4:22:33 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69527

Fed Cuts GDP View, Ups Inflation Target; Rate Moves Unlikely Click here to find out more! BY SCOTT STODDARD INVESTOR'S BUSINESS DAILY Posted 5/21/2008 The Federal Reserve slashed U.S. economic growth forecasts on Wednesday but signaled it would not cut interest rates again as it raised inflation targets. Stocks sold off hard on the one-two punch of Fed news and oil prices, which spiked above $133 a barrel. The Nasdaq and Dow both fell 1.8%. The Fed, in newly released minutes from its April 30 meeting, cut its 2008 GDP forecast by nearly a full percentage point to 0.3%-1.2% from 1.3%-2%, citing plunging consumer confidence, job cuts and the housing slump. It said inflation will remain "elevated" and that unemployment will "pick up further this year" and "remain elevated in 2009." Soaring oil costs are restraining growth and fueling inflation pressures, the Fed said. It's a dilemma for the central bank, which has a dual mandate to maintain employment while keeping inflation under control. The Fed cut interest rates by a quarter point to 2% at its April 30 meeting to try to boost the economy, which has grown at an anemic annual pace of 0.6% in each of the past two quarters. Yet two policymakers voted against the latest move and most said it was "a close call," according to the minutes. Several members added that "it was unlikely to be appropriate" for the Fed to cut rates further even if the economy contracted slightly in the near term. The Fed expects GDP to shrink in the first half before recovering in the second half of the year. Policymakers lifted its outlook for core inflation, which excludes food and energy, to 2.2%-2.4% from its old forecast of 2%-2.2%. "Although downside risks to growth remained, members were also concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices and the fact that some indicators suggested that inflation expectations had risen," the minutes said. The report reinforced traders' expectations that the Fed won't cut rates at its June meeting. But the lowered growth outlook also chilled talk of hikes later this year. The central bank expects the economy to shrink in the first half of this year and then start to recover, thanks to the rate cuts and a $168 billion government stimulus plan that is just starting to be felt. "If consumers respond aggressively to this fiscal stimulus, the combination of this and very low interest rates" could cause the economy to rebound strongly and fuel inflation, said Mike Schenk, vice president of economics and statistics at the Credit Union National Association and Affiliates. But oil prices have shot up $40 a barrel since President Bush signed the stimulus bill into law. Americans may have to spend much of their tax rebates to fill up their tanks. Crude prices jumped $4.19 on Wednesday to $133.17 on falling U.S. stockpiles and a weaker dollar. "Growth in consumer spending appeared to have slowed to a crawl in recent months and consumer sentiment had fallen sharply," the Fed acknowledged in the April meeting minutes. "The outlook for business spending remained decidedly downbeat." Policymakers also "saw little indication of a bottoming out in either housing activity or prices." The Fed said credit market turmoil appeared to be easing. "The generally better state of financial markets had caused participants to mark down the odds that economic activity could be severely disrupted by a further substantial deterioration in the financial environment," the minutes said. The central bank has flooded financial markets with liquidity in recent months.