What the Future May Hold

Chris Isidore reports, for CNNMoney.com, that the Federal Reserve has revised its economic forecast.

The Fed, says Isidore, now expects unemployment to rise to between 9.2% and 9.6%. In January, the Fed anticipated that unemployment would peak between 8.5% and 8.8%.

That revision is bad news, right? Well, yes and no.

Yes, it's bad news because it is higher than the Fed expected at the beginning of the year.

And no, because the unemployment figure in April — 8.9% — already exceeded the Fed's prediction.

Clearly, the Fed expects more jobs to be lost. But that is hardly a stop–the–presses revelation. If the Fed's prediction turns out to be correct, the unemployment rate actually will be lower than many economists have been anticipating. Those economists have been predicting a national unemployment rate in double digits.

I suppose the really bad news in today's report is that the Fed now sees more of a decline in gross domestic product (GDP). In January, the Fed thought GDP would drop 0.5% to 1.3%. The expectation now is for GDP to fall between 1.3% and 2.0%.

Again, that may be a good news/bad news kind of scenario. It certainly isn't good news that GDP will be down for the year. But that was pretty much a given, since GDP was down 6% in the first quarter of 2009. The report suggests — and the minutes of the Fed's April meeting confirm — that Fed members believe GDP will increase — albeit slightly — in the second half of the year.

Initially, the Fed's outlook had negative results on Wall Street. Stocks were down between 0.39% and 0.62% on the Dow, Nasdaq and S&P.

Elsewhere today, there was some good news for consumers. Congress approved legislation making it difficult for credit cards to raise fees and interest rates.

The new rules will go into effect in February.