Temple Leadership Seminar Outlook Talk 2 19 2009
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Temple Leadership Seminar Outlook Talk 2 19 2009

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Thank you to all who attended the 4th Annual Twilight Networking and Speaker Event co-hosted by Temple University's Fox School of Business and the Federal Reserve Bank of Philadelphia on February......

Thank you to all who attended the 4th Annual Twilight Networking and Speaker Event co-hosted by Temple University's Fox School of Business and the Federal Reserve Bank of Philadelphia on February 19th. The speaker, Loretta Mester, Senior Vice President and Director of Research for the Federal Reserve Bank, provided us with the latest information on the current state of the economy and gave us her economic outlook for 2009. Ms. Mester was kind enough to share with us her presentation which I have attached for your review.



The event was a great success and it was wonderful to see our current students, our alumni and our corporate partners networking together. Stay tuned for information on next year's date.

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  • 1. The Economic Outlook Loretta J. Mester* Senior Vice President and Director of Research Temple University Fox School of Business Leadership and Professional Development Seminar February 19, 2009 FEDERAL RESERVE BANK OF PHILADELPHIA *The views expressed here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.
  • 2. “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.” Laozi 6th century B.C. Chinese philosopher and founder of Taoism
  • 3. “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.” Laozi 6th century B.C. Chinese philosopher and founder of Taoism “It is far better to foresee even without certainty than not to foresee at all.” Henri Poincaré 19th century A.D. French mathematician, physicist, and philosopher of science
  • 4. “A good forecaster is not smarter than everyone else, he merely has his ignorance better organized.” Anonymous • Review 2008 economic performance • Discuss monetary policy actions in 2008 • Present forecast for 2009 and 2010
  • 5. Economic growth was expected to continue in 2008, but the economy turned out considerably weaker Central Tendency of FOMC Actual for Projected in January 2008 2008 Real GDP Growth 1.3 to2.0% –0.2% (4Q/4Q) Unemployment Rate 5.2 to 5.3% 6.9% (4th quarter average) Core CPI Inflation 2.0 to 2.2% 1.8% (4Q/4Q) Total CPI Inflation 2.1 to 2.4% 1.7% (4Q/4Q)
  • 6. Growth remained positive in most states in 2007… Philadelphia Fed Current Economic Activity Indexes, annualized growth in 2007 > 4% 3% to 4% 2% to 3% 0.5% to 2% -0.5% to 0.5% -2% to -0.5% -3% to -2% <-3%
  • 7. …but only 5 states had positive growth last year. PA and DE are among the weakest states. Philadelphia Fed Current Economic Activity Indexes, annualized growth in 2008 > 4% 3% to 4% 2% to 3% 0.5% to 2% -0.5% to 0.5% -2% to -0.5% -3% to -2% <-3%
  • 8. Economic growth slowed considerably in the second half of the year Percent Real GDP Growth, SAAR 5 Tax rebates 4 3 2 1 0 -1 -2 -3 -4 -5 2004 2005 2006 2007 2008
  • 9. By October, Fed policymakers had significantly reduced their forecasts for growth for 2008 and especially for 2009 Central tendency of economic forecasts of the Board of Governors and Reserve Bank Presidents January 2008 Forecasts October 2008 Forecasts 2008 2009 2008 2009 Real GDP Growth 1.3 to 2.0% 2.1 to 2.7% 0 to 0.3% –0.2 to 1.1% actual in 2008 −0.2% Unemployment 5.2 to 5.3% 5.0 to 5.3% 6.3 to 6.5% 7.1 to 7.6% Rate in Q4 actual in 2008 6.9% Core Inflation 2.0 to 2.2% 1.7 to 2.0% 2.3 to 2.5% 1.5 to 2.0% (Core PCE) actual in 2008 1.8% Inflation 2.1 to 2.4% 1.7 to 2.0% 2.8 to 3.1% 1.3 to 2.0% (PCE) actual in 2008 1.7%
  • 10. The downside risks to growth most forecasters discussed a year ago came to pass • Financial market conditions tightened further leading to a bank capital crunch, significant pull-back in lending from bank and nonbank firms, and rise in borrowing costs – Failures/near failures of large financial firms including Bear Stearns, Fannie Mae, Freddie Mac, Lehman, AIG, Wachovia, Citigroup • Equity price declines worsened and the loss in wealth curtailed consumption and investment • Housing markets did not stabilize. The turndown in housing continued to be sharp
  • 11. Housing investment did not stabilize last year. It has subtracted from growth since 2006. Real residential investment Percent Quarterly growth, SAAR 20 15 9.8 8.1 10 4.0 5 0.2 0 -5 -3.6 -10 -15 -11.6 -13.3 -16.2 -16.1 -20 -16.6 -21.5-19.5 -20.6 -25 -23.6 -25.0 -30 -27.0 -35 2005 Q1 2005 Q2 2005 Q3 2005Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4
  • 12. Housing starts and new home sales are down about 70% since their peaks in mid-2005 Index, 1980Q1 = 100 Thousands of units 2400 450 Privately owned 2100 400 housing units started 1800 350 1500 300 1200 250 FHFA house price index 900 200 600 150 New single family home sales 300 100 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Quarterly data: Last point plotted is 2008 Q4 for housing starts and home sales and 2008 Q3 for FHFA house price index
  • 13. Despite declines in construction, housing inventories remain high, so we expect further reductions in residential construction Months’ supply at current sales pace 18 16 Months’ supply of 14.7 14 condos and co-ops 12 Months’ supply of 10 single family homes 8.7 8 6 4 2 0 90 92 94 96 98 00 02 04 06 08 Source: National Association of Realtors Monthly data: Last point plotted is December 2008
  • 14. Housing prices are down considerably from their peaks Year-over-year percentage change Percent 20 15 FHFA House Price Index 10 5 0 -5 Median Existing Case-Shiller House Price Index -10 Home -15 -20 87 89 91 93 95 97 99 01 03 05 07 09 Quarterly data: Last point plotted is 2008 Q4 for Median Existing Home price and 2008 Q3 for FHFA House Price Index and Case-Shiller House Price Index
  • 15. House prices are down in our area, but not as much as in other places because we had less of a boom Annualized House Price Appreciation (%) (FHFA House Price Index) 2005 2006 2007 2008* US 11.5 5.4 0.8 −5.8 PA 11.9 6.5 2.8 −1.7 NJ 15.2 5.3 -0.3 −6.7 DE 14.9 7.3 1.4 −2.9 CA 21.1 3.8 -8.2 −23.7 NY 12.6 4.8 1.1 −5.0 NV 18.2 3.7 -6.5 −24.7 FL 27.5 8.9 -5.5 −18.9 MI 2.5 -1.3 -4.3 −9.8 * Year-to-date through 2008 Q3, annualized
  • 16. Household net worth contracted sharply last year Trillions of $ Percent Change in household net worth 20 $8 Percentage change, Change year to year 15 $6 10 $4 5 $2 0 $0 -5 -$2 -10 -$4 -15 -$6 1984 1988 1992 1996 2000 2004 2008Q3 Source: FRB Flow of Funds, annual data
  • 17. Stock prices are down over 40% since their peaks in October 2007 NASDAQ & Dow Jones S&P 500 Oct 2007 7000 15000 Dow Jones Industrials 6000 13000 5000 11000 4000 9000 3000 7000 NASDAQ 2000 5000 1000 3000 S&P 500 0 1000 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Monthly data: Last point plotted is January 2009
  • 18. Real estate and stock market wealth both fell in 2008 Billions of Dollars $3,000 Change in households’ stock and mutual fund holdings $2,500 $2,000 $1,500 $1,000 $500 $0 -$500 -$1,000 -$1,500 -$2,000 Change in households’ -$2,500 real estate equity -$3,000 97 98 99 00 01 02 03 04 05 06 07 08Q3 Source: FRB Flow of Funds, annual data
  • 19. Consumer spending contracted in the second half of the year Real personal consumption Percent 4Q/4Q growth, SAAR 6 5.4 4.9 5 4.3 4.1 4.0 4 3.5 3.4 3.2 2.8 2.6 3 2.6 2.2 1.9 2 1 0 -1 -1.3 -2 -3 95 96 97 98 99 00 01 02 03 04 05 06 07 08
  • 20. Payroll growth peaked at the end of 2007. We have lost over 3-1/2 million jobs since then. Thousands of jobs Monthly change in nonfarm payrolls 400 200 0 -200 -400 -600 -598 -800 2003 2004 2005 2006 2007 2008 2009 Average monthly gains for each year are indicated by the grey lines. Monthly data: Last point plotted is January 2009
  • 21. Job losses during the previous three recessionary periods averaged about 150 thousand per month. Since the start of this recession in December 2007, job losses have averaged nearly 250 thousand per month. Thousands of jobs Monthly change in nonfarm payrolls 200 100 0 -100 -200 -300 -400 -500 -600 Jul 1981 – Dec 1982 Jul 1990 - May 1991 Mar 2001 – May 2002 Dec 2007 – Jan 2009 Average monthly gains for each period are indicated by the grey lines. Recessions are indicated by grey bars.
  • 22. Jobs have declined 2-1/2% since their pre-recession peak. The pace of decline has quickened since last fall. Percentage change in nonfarm payrolls since previous cycle peak 8 1973 recession 1990 recession 7 1980 recession 2001 recession 6 1981 recession 2008 recession 5 4 3 2 1 0 -1 -2 -3 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 Oct 1973 Months Since Previous Peak Dec 1979 Jun 1981 Jun 1990 Feb 2001 Jan 2009 Nov 2007
  • 23. Unemployment is up sharply in the nation and our three states Civilian Unemployment Rate Percent 9 8 7.6% (Jan) 7 6.9% (Dec) U.S. 6 5 Three States 4 3 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Monthly data: Last point plotted is January 2009 for the U.S. and December 2008 for three states
  • 24. Weak sales led businesses to cut inventories. Investment has been declining in the wake of economic uncertainty and projections of continued weak demand. Billions of chain-weighted 2000 $ Percent 15 120 10 80 5 40 0 0 -5 -40 Change in Private Inventories, -10 -80 SAAR (left scale) -15 -120 Growth in Fixed Private Nonresidential Investment, SAAR (right scale) -20 -160 00 01 02 03 04 05 06 07 08
  • 25. Manufacturing activity in the nation and in our region is very weak Business Outlook Survey: General Activity Index 50 40 30 20 10 0 -10 -20 -30 -40 -41.4 -50 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Index represents percentage of respondents reporting an increase minus percentage reporting a decrease. Monthly data: Last point plotted is February 2009.
  • 26. According to our Business Outlook Survey, regional manufacturing activity is at recession levels Business Outlook Survey: General Activity Index 60 50 40 30 20 10 0 -10 -20 -30 -31.2 -34.6 -40 –37.0 -41.4 -50 –48.2 -60 -57.2 -57.9 -70 1969 1974 1979 1984 1989 1994 1999 2004 2009 Index represents percentage of respondents reporting an increase minus percentage reporting a decrease. Monthly data: Last point plotted is January 2009.
  • 27. Net export growth had been one of the economy’s strengths, but growth abroad has slowed Percent Year over year growth in exports and imports 25 Export growth 20 15 10 5 Import growth 0 -5 -10 -15 -20 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Quarterly data: Last point plotted is 2008 Q4 Source: Census Bureau
  • 28. Inflation has decelerated, partly reflecting the sharp drop in energy prices since October Percent 6 Consumer Price Index 5 4 3 2 1.7% 1 Core Consumer Price Index 0 -0.1% -1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Percentage change from a year ago, seasonally adjusted data. Monthly data: Last month plotted is December 2008.
  • 29. In response to the weakening economy, the FOMC aggressively cut the fed funds rate last year to essentially zero in December Percent 6 Nominal federal funds rate 4 2 0 Real federal funds rate -2 2001 2002 2003 2004 2005 2006 2007 2008 2009 Quarterly data. Real federal funds rate is calculated as nominal federal funds rate minus expected inflation as measured by the one-quarter-ahead CPI forecast from the Philadelphia Fed Survey of Professional Forecasters .
  • 30. The Fed established several lending programs targeted at easing short-term funding pressures, promoting credit extension, and containing systemic fallout Term Lending Facilities • Term Auction Facility (TAF): auctions off short-term credit to depository institutions eligible to borrow at the discount window (established Dec 12, 2007) – Forward TAF auctions: auctions of TAF credit for settlement later (announced Sep 29, 2008) • 28-day term RPs: to primary dealers (Mar 7, 2008) • Term Security Lending Facility (TSLF): lends Treasury securities from Fed’s portfolio to primary dealers (established Mar 11, 2008) – Auctions of options on draws on TSLF (announced Jul 30, 2008) • FX Swaps: with central banks of Europe, Switzerland, Japan, England, Canada, Australia, Sweden, Netherlands, Norway, New Zealand, Brazil, South Korea, Singapore
  • 31. The Fed established several lending programs targeted at easing short-term funding pressures, promoting credit extension, and containing systemic fallout Term Lending Facilities, continued • Asset-Backed Commercial Paper Money Market Mutual Fund Lending Facility (AMLF): loans to banks to fund purchases of high-quality asset- backed CP from MMMFs (established Sep 19, 2008) • Commercial Paper Funding Facility (CPFF): liquidity backstop to U.S. issuers of CP through a special purpose vehicle (SPV) that will buy 3-month unsecured and asset-backed CP directly from eligible issuers (established Oct 7, 2008) • Money Market Investor Funding Facility (MMIFF): to complement the CPFF and AMLF by purchasing CDs and CP from money market mutual funds (established Oct 7, 2008)
  • 32. The Fed established several lending programs targeted at easing short-term funding pressures, promoting credit extension, and containing systemic fallout Standing Facilities • Discount Window: loans to depository institutions at the primary credit rate (maturity lengthened to 30 days on Aug 17, 2007 and to 90 days on Mar 16, 2008) • Primary Dealer Credit Facility: loans to Primary Dealers at the primary credit rate (established Mar 16, 2008) Programs Focused on Longer-Term Asset Prices • Purchases of the direct obligations of and MBS backed by the housing-related GSEs (announced Nov 25, 2008) • Term Asset-Backed Securities Loan Facility (TALF): financing to support the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA) (announced Nov 25, 2008) Programs to Contain Systemic Fallout • Maiden Lane I : Bear Stearns (Mar 16, 2008) • Credit to AIG (Oct 8, 2008) • Maiden Lane II: AIG residential MBS holdings and Maiden Lane III: AIG-backed CDOs (Nov 10, 2008) • Credit to Citigroup (Nov 28, 2008)
  • 33. The Fed’s balance sheet has grown and its composition has changed Federal Reserve System Assets Federal Reserve System Assets February 11, 2009 July 11, 2007 Total assets = $1.845 trillion Total assets = $0.873 trillion 11 3 [7%] [2%] All other assets (incl FX swaps) 7% RPs 2% Treasury All other assets Fed Agency securities (incl FX swaps) securities 26% 25% 2% Treasury securities 91% CP funding TAF facility 22% 14% Discount Maiden Lanes: Window I (Bear Stearns) 1% and other II (AIG Resid MBS) 1% loans III (AIG CDOs) 1% 8% Source: FRS H.4.1 data
  • 34. The composition of the Fed’s balance sheet has changed dramatically Trillions $ 3.0 2.5 2.0 Other assets 1.5 Maiden Lanes Loans 1.0 Commercial paper 0.5 Treasury securities 0.0 1/3/07 4/4/07 7/4/07 10/3/07 1/2/08 4/2/08 7/2/08 10/1/08 12/31/08 Weekly data: Last point plotted is February 11, 2009
  • 35. Funding pressures are easing in interbank markets. The spread between 1-month LIBOR and OIS is down after spiking in October. Percent 4.0 1-month LIBOR rate minus OIS rate 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan 07 07 07 07 07 07 08 08 08 08 08 08 09 Daily data: Last point plotted is February 13, 2009
  • 36. Commercial paper spreads have fallen since October Percent 5.0 1-month AA asset-backed CP yield minus 1-month Treasury bill yield 4.5 1-month AA nonfinancial CP yield minus 4.0 1-month Treasury bill yield 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Weekly data: Last point plotted is February 6, 2009
  • 37. Mortgage rates have fallen since last fall Percent 7.0 30-year mortgage rate 6.0 5.0 10-year Treasury bond yield 4.0 3.0 Spread between 30-year mortgage rate and 10-year Treasury bond yield 2.0 1.0 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Weekly data: Last point plotted is February 6, 2009
  • 38. Corporate bond credit spreads rose sharply last fall. They have fallen since year-end, but remain elevated, especially for less creditworthy borrowers. Percent 5-year corporate bond yield spread over 5-year Treasury yield 12 BB+ (junk) 10 8 BBB 6 4 A 2 AAA 0 Jan 07 Mar 07 Jun 07 Sep 07 Jan 08 Mar 08 Jun 08 Sep 08 Jan 09 Weekly data: Last point plotted is February 6, 2009
  • 39. Monetary policy becomes more complicated at the zero bound, but remains effective • With a weak economy, optimal policy calls for low real interest rates Real rate = Nominal rate – Expected inflation – Currently, the real ff rate ≈ −0.8 percent • Normally, if the economy weakens further, market interest rates fall, and monetary policymakers reduce the ff rate target in tandem. – With stable inflation expectations, this means the real ff rate also falls. – Other borrowing rates also tend to fall, since Long-term interest rate = Average of current and expected future short-term interest rate + Term premium • Two issues for policymakers near the zero bound – The Fed has reduced the nominal ff rate as far as it can go. – Inflation expectations and inflation have been falling. If this continues to happen, real rates will rise and the real cost of borrowing will increase.
  • 40. Alternative methods can be used to help bring real borrowing rates down even when at the zero bound Long-term interest rate = Average of current and expected future short-term interest rate + Term premium Real rate = Nominal rate – Expected inflation • To lower real borrowing rates: – Lower expected future short-term rates – Lower the term premium on long rates – Increase inflation expectations (1) Quantitative easing or credit easing – Add more reserves to the banking system than needed to keep ff rate = 0 – Use composition of the Fed’s balance sheet to target borrowing rates in particular markets (e.g., ABCP, mortgages) (2) Buy longer-term Treasury securities – Fed could buy securities with longer maturities to have direct effect on long rates; might also put downward pressure on term premium by increasing total demand for long-term issues, and reducing supply available to the public (3) Communication and commitment: Announce commitment to keep rates low for specified period of time or until specified event occurs (4) Communication and commitment: Set an explicit medium-run inflation goal – Helps to anchor inflation expectations
  • 41. What does the future hold?
  • 42. Fed policymakers and private sector forecasters see flat to negative growth this year, with some recovery in 2010 Central tendency of FOMC Survey of Professional Forecasters January 2009 Forecasts 2009 Q1 Forecasts 2009 2010 2009 Real GDP Growth −1.3 to −0.5% 2.5 to 3.3% −1.1% (Q4/Q4) Unemployment 8.5 to 8.8% 8.0 to 8.3% 8.9% Rate in Q4 Core Inflation 0.9 to 1.1% 0.8 to 1.5% 1.1% (Core PCE) (Q4/Q4) Inflation 0.3 to 1.0% 1.0 to 1.5% 0.2% (PCE) (Q4/Q4)
  • 43. Our latest Survey of Professional Forecasters forecasts negative growth over the first half of the year and a slow recovery in the second half Percent 4.8 4.8 4.8 5 3.9 4 3.0 2.8 2.7 3 2.6 1.8 2 1.5 1.3 0.9 1.0 0.8 1 0.0 0 -0.2 -1 -0.5 -2 -1.8 -3 -4 -3.8 -5 -5.2 -6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 Hatched bars are median forecasts from the 2009Q1 Survey of Professional Forecasters
  • 44. Our latest Survey of Professional Forecasters indicates the unemployment rate will continue to rise through 2009 Percent 10 Civilian Unemployment Rate 9 8 7 6 5 4 3 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Dotted line is median forecast from the 2009Q1 Survey of Professional Forecasters
  • 45. Past declines in oil and other commodity prices and weak demand mean headline and core inflation will decelerate in 2009. Our SPF forecasts inflation is below 2% over the next two years. Personal Consumption Expenditure Index Personal Consumption Expenditure Index Percent, excluding food and energy 4Q/4Q growth, SAAR (= core inflation) 5 4 3.5 3.3 3.1 3 2.3 2.2 2.2 2.2 1.9 1.9 1.7 1.8 2 1.8 1.8 1.8 1.6 1.5 1.4 1.1 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Hatched bars represent median forecasts from the 2009 Q1 Survey of Professional Forecasters.
  • 46. The forecast assumes further policy stimulus • A fiscal stimulus package of around $800 billion dollars, which includes tax cuts, subsidies to distressed homeowners, grants to state and local governments, and infrastructure spending. – Adds about 1 percentage point to real GDP growth in both 2009 and 2010. – The government deficit as a percent of GDP rises from about 2% to over 7% by the end of next year, the highest since WWII. • “The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time…The focus of the Committee's policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve's balance sheet at a high level.” • Progress on clearing up financial system system problems and in stemming the rate of home foreclosure
  • 47. There are significant risks to the baseline forecast • The risks to growth are on the downside – Financial market conditions could worsen instead of improve • Fed’s targeted liquidity provisions may be less effective than hoped • Financial system still has to repair itself – Housing markets may not stabilize next year, house prices might decline more significantly than expected, commercial real estate markets may decline significantly – Labor markets could deteriorate more than expected • The risks to inflation are on the downside in the near term and on the upside in the medium term – Weak demand and recession-deflation psychology may put further downward pressure on prices – Excess liquidity may put upward pressure on inflation later in the forecast horizon when the recovery is underway – Oil prices may rise or fall rather than stabilize
  • 48. Our baseline forecast • No growth in 2009: Contraction in the first half followed by weak positive growth in the second half – Declines in financial and housing wealth and employment, and tighter credit conditions keep consumer spending weak, despite support from fiscal stimulus and low energy prices – Business investment and residential investment subtract from growth this year – With weak growth abroad, the export sector does little to buoy our economy • Growth begins to improve modestly in the second half of 2009 and in 2010, as the housing contraction stabilizes, credit conditions improve, the effects of monetary and fiscal stimulus are felt, progress is made on banking system problems and foreclosures • Labor markets are weak. Firms cut payrolls sharply in the first half of 2009. Job growth doesn’t resume until mid-2010 when firms are convinced the recovery is in place. The unemployment rate rises this year into next year. • Past declines in oil and other commodity prices and weak demand mean inflation decelerates in 2009 to around 1%. Inflation rises in 2010 as the economic recovery is underway, but remains below 2%.
  • 49. FEDERAL RESERVE BANK OF PHILADELPHIA