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The FOMC already voted to keep rates at zero today, but now we have an economic outlook that has come out for what Ben Bernanke and friends see as the target economic data for this year and next.  Our only note is that these “economic downgrades” may still have more room to come lower yet ahead.

For 2011 its Core-PCE forecast has been revised To 1.5% to 1.8% from 1.3% to 1.6%; in 2012 its core PCE forecast was revised to 1.4% to 2.0% From 1.3% to 1.8%.  The nominal PCE inflation forecast was revised for 2011 to 2.3% to 2.5% from a prior 2.1% to 2.8% and the 2012 figures went to a range of 1.5% to 2.0% from a prior target of 1.2% to 2.0%.  The long and short is that the inflation targets are slightly higher.

On the jobs front the picture is not pretty by any standard.  The forecast for 2011 unemployment has been moved to 8.6% to 8.9% from a prior 8.4% to 8.7%.  For 2012, that unemployment rate is now expected to be 7.8% to 8.2% from a prior 7.6% to 7.9%.  How fun it must be to be graduating from college.

The GDP picture is still positive but less aggressive.  The 2011 U.S. growth forecast was cut to a range of 2.7% to 2.9% from a prior range of 3.1% to 3.3%.  For 2012, GDP has been revised to a range of 3.3% to 3.7% from a prior range of 3.5% to 4.2%.

In short… Higher or more at least focused inflation, a weaker jobs market expectation, and a lower GDP target.

Sadly, we are not even sure where the FOMC is deriving these targets from.  If you just used the slowdown seen so far in Asia and in Europe it is very possible that these figures are still too rosy.  This is also not taking into consideration a stalemate on the debt ceiling and the election cycle.

Don’t you just love the new normal?   Maybe these numbers go higher again or maybe they get worse.  Either way, the base case for the economy is less positive.

JON C. OGG