The Fed Speaks

That the Fed is going to keep interest rates low for the foreseeable future is the most immediate news that came out of Ben Bernanke's announcement yesterday, but just as significant was the Fed's outlook for the economy. As we mentioned earlier in the context of the leading economic indicators, the forecast is for the economy to contain expanding, but at an excruciatingly slow pace.

The key is in the details here: Whereas the Fed said "economic activity has continued to strengthen" in April, the last time it concluded one of these two-day meetings, now it says the economic recovery is merely "proceeding." The big issues seem to be the continuing troubles in Europe and a housing market that appears to be slowing again. While the previous Fed report noted that housing had "edged up," that language was absent from the most recent report.

Was there any good news in the Fed report? You have to look carefully, but there are a couple of things moving in the right direction. "Household spending is increasing," for one thing, and "business spending on equipment and software has risen significantly." And inflation remains something the Fed is almost entirely unconcerned about. Aside from that, we may be muddling along in our present economic situation for some time to come.