On this day a national holiday in France, the economic future clouded for the United States. Retail sales fell 0.5% in June after falling 1.1% in May, and import prices fell 1.3% last month. Some due to a 2.3% drop in auto sales, others because of falling oil prices and rising dollar. All these indicators disappointing in addition to reserves of crude continue to decline. Only bonen news: the budget deficit continues to decline. If Congress sees an encouraging sign, he is aware that the United States enjoy the benefits of its rescue plan and the increase in assets held by the Fed.
In these circumstances, the Fed seeks to be less optimistic about the United States.Within minutes of its monetary policy meeting in June released Wednesday, the Fed has lowered its forecast for growth in the U.S. this year. U.S. GDP is expected to be between 3% and 3.5%, while three months ago, it was a growth from 3.2% to 3.7%.
Consequently, the Fed anticipates a slower decline in unemployment this year. The unemployment rate should be between 9.2% and 9.5%, between 8.3% and 8.7% in 2011 (against 8.1% to 8.5% projected earlier) and between 7.1 % and 7.5% in 2012 (against 6.6% and 7.5%).
Fear of deflation
The deteriorating outlook led the U.S. central bank to consider further action on monetary policy to support the U.S. economy. Its leaders have already agreed a policy accommodative, ie a decline in interest rates was not necessary."The committee would need to consider whether further support could be appropriate if the outlook were to worsen significantly," we read in the minutes. He added: "A small number of participants cited a risk of deflation."
Anyway, it is clear that the maintenance of low levels of interest rates does not seem to be enough to revive the U.S. economy more vigorously. The meeting of the Monetary Policy Committee of 22 and 23 June had maintained the interest rate the Fed close to zero, in hopes of boosting up the credit and economic activity.
Wall Street plunges into the red
The markets have been quick to respond to these new expectations: having moved solidly in the green mid-session, the NYSE has quickly sunk into the red.Around 8:40 p.m., the Dow Jones lost 0.40% to 10,321 points and the S & P 500 retreated 0.46% to 1090 points, while Nasdaq was flat at 2,242 points.