Highlights From the Fed’s Shocking News Conference

GDP growth, unemployment rate and interest rate forecasts

   

Last Wednesday, the Fed announced after its Federal Open Market Committee (FOMC) meeting that it’s now forecasting just 2.2% to 2.7% GDP growth for 2012. The FOMC also forecasts an unemployment rate of 8.2% to 8.5% for 2012. Finally, the Fed provided its first-ever interest rate forecast, predicting that long-term rates will eventually rise to 4% to 5% — up substantially from current 10-year Treasury bond yields of 1.93%.

The biggest news coming out of the Fed’s unprecedented series of announcements last week was that the central banks pledged to extend its current 0% interest rate policy through at least late 2014. This shocking news is essentially an 18-month extension from the Fed’s previous guidance of low rates through mid-2013. Fed Chairman Ben Bernanke’s official reason for extending 0% short-term rates for six years (i.e., from late 2008 to late 2014) is that the U.S. economy remains &l