“ … human beings have a natural tendency to manage risk after the fact.”
Michael A. Gayed, Pension Partners
If I were betting on the ponies, Janet Yellen (or any Federal Reserve Board member, for that matter), would not be my first choice to bring along for consultation.
As we’ve previously pointed out, the Fed’s forecasting record is pretty lame. The Fed has consistently projected a higher level of growth for the economy than we’ve actually seen (although even Fed projections are consistently well below the 3.3% average growth the economy enjoyed in the years between the end of World War II and the financial crisis).
The Fed projected growth rate for 2015 was 2.6% to 3%. While it’s too early to tell what the final numbers will be, the just-released latest estimate from the Bureau of Economic Analysis (BEA) for the third quarter of 2015 was 2.0% (down from its previous estimate of 2.1%), which isn’t too far off from the 1.5% growth rate for the first half of 2015.
As David Stockman noted, “Notwithstanding the most aggressive monetary stimulus in recorded history – 84 months of ZIRP and $3.5 trillion of bond purchases – average real GDP growth has barely amounted to 50% of the Fed preceding year forecast; and even that shortfall is understated owing to the BEA’s systemic suppression of the GDP deflator.”