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

Posted By Jim On 09/21/2009 @ 12:08 pm In NEWS | 6 Comments

On Wednesday, the Federal Reserve will conclude its two day FOMC meeting [3] 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 [4]. 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 [5] [CNN Money]


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[3] two day FOMC meeting: http://www.federalreserve.gov/monetarypolicy/fomc.htm

[4] Jim asked if you thought the recession was over: http://www.bargaineering.com/articles/your-take-is-the-recession-over.html

[5] Fed not acting like there’s a recovery: http://money.cnn.com/2009/09/18/news/economy/fed_meeting_walkup/?postversion=2009092105

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