The Economic Impact of Banking Turmoil
Notes on the Week Ahead
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The Fed's Unemployment Forecast Could Be Marked Down
With elevated financial instability Fed officials could mark down the growth forecast. The problem won't be centered on consumers as historical experience of other bouts of financial instability suggests that while consumer confidence is often impacted consumer spending generally stays on track at least initially. However business spending could be hurt for two reasons. First businesses may slow hiring and capital spending plans due to increased recession worries. And second we are very likely to see a further tightening of bank lending conditions as banks focus on the quality of their balance sheets rather than on growth.
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