WASHINGTON (MNI) – The following is an excerpt from the Minutes of
the November 2-3 Federal Open Market Committee containing updated
quarterly projections and the outlook, published Tuesday:

Summary of Economic Projections In conjunction with the November
2-3, 2010, FOMC meeting, the members of the Board of Governors and the
presidents of the Federal Reserve Banks, all of whom participate in the
deliberations of the FOMC, submitted projections for output growth,
unemployment, and inflation for the years 2010 to 2013 and over the
longer run. The projections were based on information available through
the end of the meeting and on each participants assumptions about
factors likely to affect economic outcomes, including his or her
assessment of appropriate monetary policy. Appropriate monetary policy
is defined as the future path of policy that each participant deems most
likely to foster outcomes for economic activity and inflation that best
satisfy his or her interpretation of the Federal Reserves dual
objectives of maximum employment and stable prices. Longer-run
projections represent each participants assessment of the rate to which
each variable would be expected to converge over time under appropriate
monetary policy and in the absence of further shocks.

FOMC participants’ projections of economic activity over the next
several years indicated that they expected the economic recovery to
continue, with unemployment declining slowly and inflation remaining
subdued. As indicated in table 1, relative to their previous projections
in June, participants saw weaker real activity this year and expected a
somewhat more gradual economic recovery over the next several years.
Most participants expected the unemployment rate would slowly decline
over the forecast horizon, while the rate of inflation would edge up but
stay subdued. Participants generally indicated that the pace of
expansion in real gross domestic product (GDP) would rise over the
projection period to one that was somewhat above their assessment of the
economy’s longer-run rate of growth. They judged that the pickup in
economic activity would be spurred in part by accommodative monetary
policy and a gradual easing in credit conditions that would help buoy
spending by consumers and businesses. Stronger spending, in turn, would
lead to improved confidence in the economy, a pickup in hiring, and a
further improvement in credit conditionsforces that would continue to
support spending. But participants thought that several factors would
likely continue to restrain economic growth for a while, including a
high degree of caution exhibited by consumers and businesses, persistent
weakness in the residential and commercial real estate sectors of the
economy, and still-tight credit conditions. Somewhat more than half of
the participants judged that, in the absence of any additional shocks to
the economy, the economy would converge fully to its longer-run rates of
output growth, unemployment, and inflation within about five or six
years; the rest indicated that it could take longer for unemployment to
fall back to its longer-run rate or for inflation to rise back to the
level they deemed desirable in the longer run. Participants continued to
attach an unusually high degree of uncertainty to their projections
relative to longer-run norms. While many participants judged the risks
surrounding their projections of each variable to be broadly balanced, a
similar number indicated that the combination of downside risks to
growth and upside risks to unemployment predominated.

The Outlook

The central tendency of participants’ projections of real GDP
growth in 2010 was a narrow band from 2.4 to 2.5 percent, down from 3.0
to 3.5 percent in June. Participants stated that incoming economic data
had weighed heavily on their forecasts for growth this year. The Bureau
of Economic Analysis published its comprehensive annual revisions and
advance estimate of second-quarter GDP after participants submitted
their June projections, and these data showed that the expansion in real
GDP in the first half of the year had been slower than the participants
had expected. The most recent data on output growth in the third quarter
indicated that the economy had continued to expand modestly.
Participants noted that consumer spending appeared restrained by lower
household wealth, relatively tight credit conditions in some markets,
and households ongoing desire to repair their balance sheets. In
addition, participants generally viewed the incoming data on housing,
manufacturing, trade, and labor market activity as weaker than they had
expected at the time of the June meeting. Participants also noted that
the support to growth from earlier fiscal stimulus and inventory
investment had waned.

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** Market News International Washington Bureau: 202-371-2121 **

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