Fed Seen Twisting To Risk Management To Spur U.S. Growth

By Craig Torres – Jun 18, 2012

(Bloomberg)

Federal Reserve officials must choose this week between their best estimates and their worst fears of what will happen to the U.S. economy.

Policy makers will bring new forecasts to their June 19-20 meeting and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year. Lurking in the background is the risk of increasing financial stress in Europe and stubbornly high U.S. unemployment that has remained above 8 percent for 40 consecutive months.

All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan, which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen, the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York, used the phrase in the past month.

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