Fed Says Recession “Likely” Over, Experts Don’t Believe It

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Grays Papaya Recession SpecialOn Wednesday, the Federal Reserve will conclude its two day FOMC meeting and announce what they plan to do with the federal interest rate. Most experts expect the rate to stay at the 0% to 0.25% range the Fed set several months ago. With unemployment near or above double digits in some areas, it would be extremely difficult for the Fed to justify a rate increase at this point.

Last week, Jim asked if you thought the recession was over. In the post, he highlighted Ben Bernanke’s comments about how we were “very likely” seeing the end of the Recession but it doesn’t appear that experts believe him!

In general, the Federal Reserve lowers the target rate when it wants to boost the economy. Lower rates mean businesses can borrow money cheaper. It also means banks offer lower rates on deposit accounts, like CDs and savings accounts. The lower they go, the less incentive we have to save – so we boost the economy be spending more. The 0% – 0.25% target range is about as low as it can go.

We need to wait until Wednesday to see what the Fed announces but experts believe rates won’t increase until next year. If you were hoping for a frothy return to economic prosperity… you might have to wait until next year to pop the bubbly.

Fed not acting like there’s a recovery [CNN Money]

{ 6 comments, please add your thoughts now! }

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6 Responses to “Fed Says Recession “Likely” Over, Experts Don’t Believe It”

  1. Steve says:

    Just a thought, but it seems that everyone is forgetting that the economy can stay stagnant.

    Why does everyone believe that the economy has to get worse or get better? Whatever happened to staying as it is? Just because the recession is over, a recovery is not necessarily going to occur immediately afterwords.

    I believe the economy will plateau for a while longer while everything, and everyone, adjusts to the new market conditions. The recession took a while before jobs were cut, and when the recovery happens, jobs will take a while before they are offered again.

    • zapeta says:

      I agree completely. I feel that the economy will stay stagnant or grow slowly for the next 6 months or more.

  2. Neil says:

    Also, rates decline to boost economic activity, but only rise to fight inflation. Inflation trails economic recovery, so rates go up some time after the economy does begin growing.

    • Jim says:

      They increase rates if they think inflation will get out of control in the future. It takes so long for the effects of a rate change to affect the market so they try to stay a step ahead. If they really thought the economy was going to recover, they would’ve started to increase the rates.

  3. Julio says:

    I know this is off topic, but I used to live in Manhattan and miss Gray’s papaya’s famous dogs so much. That picture brings back memories.

  4. Damon Day says:

    ya right, with unemployment still climbing, the government raising taxes and spending us into oblivion. Ya, I am thinking the real recession hasn’t even started yet. I hope they can figure out that they are making things worse fairly quickly and stop doing things. We will be better off if they did nothing. Their tinkering is the main reason we are in this mess in the first place.

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