Federal Reserve press conference, 2012-12-12 — Chair Ben Bernanke

Question (Marcy Gordon, Associated Press): Could I ask, also, given that the—your economic projections are all the more important now that you’ve specified these targets, is it difficult to put forward these projections now given the uncertainty over the fiscal cliff? How sort of plastic are these?
Answer: Well, clearly the fiscal cliff is having effects on the economy. Even though we’ve not yet even reached the point of the fiscal cliff potentially kicking in, it’s already affecting business investment and hiring decisions by creating uncertainty or creating pessimism. We saw what happened recently to consumer sentiment, which fell, presumably in part because of concerns about the fiscal cliff. So, clearly, this is a major risk factor and a major source of uncertainty about the economy going forward. I would suspect and, although the participants don’t all make this explicit, but I would suspect that what they are assuming in their projections is that the fiscal cliff gets resolved in some intermediate way, whereby there is still some fiscal drag but not as much as implied by the entire fiscal cliff. So I think that’s probably the underlying assumption that most people took when they made their projections. But as you—you’re absolutely right that there is a lot of uncertainty right now and if the fiscal cliff situation turns out to be resolved in a way very different from our expectations, I’m sure you would see changes in the forecast.