Fed Staff Suddenly Saw U.S. Economy in 2008 Needing Low Rate Era

They were only off by 5-10 more years.

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Fed Staff Suddenly Saw U.S. Economy in 2008 Needing Low Rate Era

Federal Reserve economists warned in December 2008 that five years could pass before growth revived enough to warrant raising interest rates from near zero, as the magnitude of the economic meltdown dawned on Fed officials.

The warnings, part of preparatory documents for policy meetings in 2008 released by the Fed yesterday, highlight the sudden alarm among central bank staff as the economy began to plunge in the worst downturn in seven decades. Six weeks earlier, the economists had predicted a contraction of no more than 1 percent and said the Fed could restore growth by lowering the main rate to 0.5 percent before tightening in 2010.

By the time of the Dec. 15-16 meeting, Fed staff warned that the central bank would simply be unable to “provide enough stimulus to generate a robust recovery with a relatively quick…

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