Evening Must-Read: Binyamin Appelbaum: The Fed Appears to Have Been Wrong About Growth. Again

Binyamin Applebaum: The Fed Appears to Have Been Wrong About Growth. Again: “Federal Reserve officials, who have persistently overestimated the strength of the economic recovery…

…predicted last June that the economy in 2014 would finally grow more than 3 percent for the first time since the recession. The updated forecasts the Fed will publish on Wednesday are likely to reflect more modest expectations…. The Fed’s policy-making committee is still expected to announce another $10 billion cut in its monthly bond purchases…. But the continuing wait for faster growth has reinforced the concern of some critics that the Fed is retreating too quickly from its stimulus campaign… undermining its own forecasts by providing less support to the economy…. ‘Given the persistent overoptimism about the growth outlook by Federal Reserve officials and others in recent years, we shouldn’t count our chickens before they hatch’, William C. Dudley, president of the Federal Reserve Bank of New York and vice chairman of the Fed’s policy-making committee, said last month in New York. The pattern is striking. In every year since 2008, Fed officials have steadily reduced their initial expectations for economic growth. In each year except 2012, they had still overestimated the strength of the economy in June of the forecast year. The consequences at times have been painful. Fed officials have said they did not act more strongly to stimulate the economy in the immediate aftermath of the recession because they expected the economy to rebound more quickly…