Fed sees end to recession, eyes exit strategy

WASHINGTON, July 16, 2009 (AFP) – The Federal Reserve signaled Wednesday it sees an end this year to the brutal recession and hinted that it was preparing an “exit strategy” for its unprecedented stimulus efforts. The central bank raised its outlook for 2009 and 2010 economic output, projecting a rebound in the second half of 2009 that would leave the contraction for the year at between 1.0 and 1.5 percent.

Although it gave no detailed forecast for the second half of 2009, the rebound would have to be robust to offset the 5.5 percent pace of decline in the first quarter, on the heels of a 6.3 percent slide in the fourth quarter of 2008.

“If this forecast comes true, the recession will end this year,” said Josh Feinman, chief economist at Deutsche Bank’s DB Advisors.

To achieve the figures in the Fed outlook, “we’re going to have to get some sort of growth and there would presumbaly be enough positive momentum to declare an end to the recession,” he said.

“But it’s a forecast. It’s a reasonable forecast, but it’s still not a reality.”

The Fed also appeared to address concerns that it lacked an exit strategy to pull back some of its vast stimulus to avoid a surge in inflation as the recovery