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Sunday, October 16, 2011

Wells Fargo's Monthly Economic & Financial Commentary- October 2011

- Our outlook calls for moderate, subpar GDP growth of 1.5 percent during the second half of this year and in 2012, with no change in the Federal Reserve’s policy regarding the federal funds rate.

. For the next six months, we anticipate growth will reflect modest gains in consumer spending, equipment and software spending, and improvements in commercial and residential construction.

- The Consumer Price Index is expected to rise 3.7 percent during the second half of 2011, limiting growth in real disposable income to 1.4 percent for the year.

. With the core PCE deflator approaching the Fed’s 2.0 percent implicit target, the Federal Reserve will pursue Operation Twist to lower the long end of the yield curve, but we do not expect a third round of quantitative easing.

- Last Friday’s employment report showed modest job gains and unemployment above 9.0 percent, reinforcing the message that structural unemployment has become a key issue in the jobs market.

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