Tags: US | Fed | Forecast

Fed Cuts Growth Outlook Amid Grim View of Economy, Jobs

Wednesday, 14 Jul 2010 02:06 PM

 

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Federal Reserve officials have a slightly dimmer view of the economy than they did in April, reflecting worries about how the European debt crisis could affect U.S. growth and job prospects.

Fed officials said Wednesday in an updated economic forecast that they think the economy, as measured by the gross domestic product, will grow between 3 percent and 3.5 percent this year. That's a downward revision from a growth range in their April forecast of 3.2 percent to 3.7 percent.

The Fed's latest forecast sees the unemployment rate, now at 9.5 percent, possibly staying at that figure or in the best case falling to 9.2 percent. In the April forecast, the Fed had a slightly lower bottom number of 9.1 percent.

The Fed said in the minutes of its June 22-23 meeting that its lower economic projections reflected "economic developments abroad" — a reference to the debt crisis that began in Greece and threatened to spread to other European countries.

While reducing the forecast for growth and employment, the Fed also saw less of a threat from inflation.

The Fed predicted that a key inflation gauge that's tied to consumer spending would show prices rising 1 percent to 1.1 percent this year. That's down from an April forecast that consumer prices would increase by 1.2 percent to 1.5 percent.

The absence of inflationary pressures gives the Fed leeway to keep interest rates low to try to bolster growth as the economy recovers from the deepest recession since the 1930s.

The new forecast was compiled at the last meeting of the Fed's interest rate-setting Federal Open Market Committee on June 22-23. At that meeting, the FOMC, which is composed of Fed board members and the 12 Fed regional bank presidents, kept a key rate at a record low of 0 to 0.25 percent, where it's been since December 2008.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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