by Calculated Risk on 11/02/2011 11:43:00 PM

From Fed Chairman Ben Bernanke:

I certainly understand that many people are dissatisfied with the state of the economy. I'm dissatisfied with the state of the economy. Unemployment is far too high. Inequality, which is not a new phenomenon, it's been going on - increases in inequality have been going on for at least 30 years. But, obviously, that - as that has continued we now have a more unequal society than we've had in the past.

So, again, I fully sympathize with the notion that the economy is not performing the way we would like it to be, and in that respect the concerns that people express across the spectrum are -- are understandable.
...
I think the best way to address inequality is to create jobs. It gives people opportunities. It gives people a chance to earn income, gain experience and to ultimately earn more. But that's an indirect approach that's really the only way the Fed can address inequality per se.
...
I think it would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs.

A weak economy, few jobs, and rising inequality will lead to more social unrest.

As an example, from the San Francisco Chronicle: Occupy Oakland crowd marches on port

Thousands of people jammed into downtown Oakland on Wednesday for a general strike called by Occupy Oakland to protest economic inequity and corporate greed - then marched en masse to the Port of Oakland and shut it down.
...
Protesters smashed windows around 3 p.m. at a Wells Fargo Bank branch at 12th Street and Broadway, a Bank of America near Lake Merritt, a dry-cleaning store and a financial office on Webster Street near 21st Street, and at a Whole Foods store on Bay Place ...

by Calculated Risk on 11/02/2011 07:25:00 PM

From the Financial Times Eurozone crisis: live blog

German Chancellor Angela Merkel said the Greek referendum would determine whether Greece was to stay in the euro. ...

Greek Prime Minister George Papandreou said: “The Greek people want us to remain in the eurozone. We are part of the eurozone and we are proud to be part of the eurozone. Being part of the eurozone means having many rights and also obligations. We can live up to these obligations. I do believe there is a wide consensus among the Greek people and that’s why I want the Greek people to speak”

From Reuters: EU, IMF Aid to Greece on Hold Until After Referendum

"As soon as the referendum is completed, and all uncertainty removed, I will make a recommendation to the IMF executive board regarding the sixth tranche of our loan to support Greece's economic program," IMF Managing Director Christine Lagarde said in a statement.

The confidence vote will be this Friday, and the referendum will probably be in early December - since Greece will not receive any more aid until after the referendum. Greece has a large bond payment due on December 11th, so the referendum will probably be before that date - or maybe Papandreou will lose the confidence vote this week.

by Calculated Risk on 11/02/2011 03:57:00 PM

• The video of the press conference will be available soon.

• Bernanke made it clear the Fed stands ready to take additional policy action. This would probably be additional buying of agency (Fannie & Freddie) MBS.

Sudeep Reddy at the WSJ has some notes: Recap: Ben Bernanke’s November Press Conference and this is the key section:

"The outlook remains unsatisfactory over the next few years," [Bernanke] says, and at the Fed "we'll continue to ask ourselves" whether additional stimulus is warranted. Doing more "remains on the table," he says.

Although Bernanke was noncommittal, and always pointed out that further action would be a committee decision, I believe his comments mean the Fed will act if the outlook doesn't improve soon as compared to their current forecast. Their current forecast is already pretty dismal - clearly "unsatisfactory".

• Here are the Fed's current forecasts. In the previous post, I included these forecasts and the earlier forecasts for this year to show the steady downgrade.

• Bernanke twice repeated that "it would be helpful if the Fed got some help from other parts of the government" on trying to stimulate the economy in the short term. He was clearly referring to a new jobs program.

by Calculated Risk on 11/02/2011 02:15:00 PM

Below is a live video feed for Ben Bernanke's press conference.

UPDATE: The forecast updates have been added below the video.

The FOMC statement was released at 12:30 PM. The FOMC noted that "economic growth strengthened somewhat in the third quarter" although "recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated". They also noted "Inflation appears to have moderated since earlier in the year".

Here are the new FOMC projections.

GDP growth was revised down to around 1.7% this year.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2011	2012	2013	2014
Jan 2011 Projections	3.4 to 3.9	3.5 to 4.4	3.7 to 4.6	NA
April 2011 Projections	3.1 to 3.3	3.5 to 4.2	3.5 to 4.3	NA
June 2011 Projections	2.7 to 2.9	3.3 to 3.7	3.5 to 4.2	NA
November 2011 Projections	1.6 to 1.7	2.5 to 2.9	3.0 to 3.5	3.0 to 3.9

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was revised up to 9.0% to 9.1% (this is Q4 unemployment rate). The FOMC thinks the unemployment rate will still be around 8% at the end of 2013 and in the 6.8% to 7.7% in 2014!

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2011	2012	2013	2014
Jan 2011 Projections	8.8 to 9.0	7.6 to 8.1	6.8 to 7.2	NA
April 2011 Projections	8.4 to 8.7	7.6 to 7.9	6.8 to 7.2	NA
June 2011 Projections	8.6 to 8.9	7.8 to 8.2	7.0 to 7.5	NA
November 2011 Projections	9.0 to 9.1	8.5 to 8.7	7.8 to 8.2	6.8 to 7.7

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

Inflation was revised up for 2011.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2011	2012	2013	2014
Jan 2011 Projections	1.3 to 1.7	1.0 to 1.9	1.2 to 2.0	NA
April 2011 Projections	2.1 to 2.8	1.2 to 2.0	1.4 to 2.0	NA
June 2011 Projections	2.3 to 2.5	1.5 to 2.0	1.5 to 2.0	NA
November 2011 Projections	2.7 to 2.9	1.4 to 2.0	1.5 to 2.0	1.5 to 2.0

But core inflation is seen at levels still below the FOMC target.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2011	2012	2013	2014
Jan 2011 Projections	1.0 to 1.3	1.0 to 1.5	1.2 to 2.0	NA
April 2011 Projections	1.3 to 1.6	1.3 to 1.8	1.4 to 2.0	NA
June 2011 Projections	1.5 to 1.8	1.4 to 2.0	1.4 to 2.0	NA
November 2011 Projections	1.8 to 1.9	1.5 to 2.0	1.4 to 1.9	1.5 to 2.0

by Calculated Risk on 11/02/2011 12:33:00 PM

Fed Chairman Ben Bernanke will hold a press briefing at 2:15 PM ET.

From the Federal Reserve:

Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.