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Fed Meets Amidst Lowered Expectations

 
Fed Meets Amidst Lowered Expectations
Posted June 18th, 2014 @ 7:08am by BY KTRH's Corey Olson

As the U.S. economy continues to sputter along, all eyes are on the Federal Reserve Board as it meets this week to set the nation's economic policy.  The big issue is an expected drop in the Fed's economic growth forecast for the remainder of the year.  Back in March, the Board forecast growth of around 3% for this year, but that was before the economy actually shrank by 1% in the first quarter.  Many economists expect the Fed to lower its growth forecast closer to 2% for the year.  At the same time, unemployment and inflation numbers are slightly improving, which has some analysts wondering if the Board will start to hike interest rates.  The Fed is also expected to continue trimming back its bond-buying stimulus program, which is currently at $45 billion a month.

Dr. Joe Ueng, Economics Professor at Houston's St. Thomas University, does not expect any drastic moves from this Fed meeting.  "We're going to see shorter-term interest rates stay low, almost like zero, their current level, all the way to mid-2015, and maybe longer than that," he tells KTRH.  "Long-term interest rates, with this new forecast, are going to stay low as well. So for the average person that's good news...mortgage rates are going to be low for a long time."

Like many economic analysts, Dr. Ueng isn't overly concerned with the sudden contraction of the economy last quarter.  "This lower-than-expected GDP growth rate is really not totally unexpected, given the lousy weather we had during the first quarter...economic activities were pretty slow because of the bad weather."  Overall, he believes the economy is still improving since the Great Recession of a few years ago.  "The last three years it has been a slow process," says Dr. Ueng.  "But, slowly but surely, we are moving on the right track.

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