Finally, the Federal Reserve noted something correctly, namely that the economy is not in great shape, and even went so far as to note that things probably won’t start improving until 2015 or later. In today’s Federal Reserve announcement, the Fed dialed back its growth projections by 0.3% to the low to mid 2% range, and made these other observations and promises:
FED EXPECTS TO MAINTAIN `HIGHLY ACCOMMODATIVE’ MONETARY POLICY - FED SEES `EXCEPTIONALLY LOW’ RATES THROUGH AT LEAST LATE 2014
- FED TO KEEP REINVESTING HOUSING DEBT INTO MORTGAGE SECURITIES
- FED SAYS INFLATION `SUBDUED’
- FED SAYS HOUSING `REMAINS DEPRESSED’
- FED REITERATES `SIGNIFICANT DOWNSIDE RISKS’
In short, we will be living with zero percent interest rates until 2015, unless they extend the range future at future meetings.
For those expecting deflation to be expressed in stock or commodity prices, today was something of a setback. Oil is well over $110 on the world stage, grains are running again, and gold is up handily on the year and certainly on the day.
Of course you might be wondering how low inflation and lower growth are reflected in higher stock and gold prices, because on the surface, higher prices for both should be associated with the opposite conditions.
There are two reasons. One is that nobody has any great confidence in the Fed’s forecasting abilities. So there’s not much weight placed on the Fed’s views on inflation and growth. The recent embarrassment of the 2006 Fed minutes, showing blissful unawareness of the risks that
by mark-cochrane-2 
