Fed reduces forecast for 2010 growth
THE US economy’s recovery will be slower over the rest of the year than originally forecast, according to the Federal Reserve, which yesterday revised down its growth projections for the first time since the economic rebound began.
Minutes of the Fed’s meeting, published yesterday, showed its central forecast is now for the economy to grow between 3 to 3.5 per cent in 2010, down from April’s forecast of 3.2 to 3.7 per cent.
The change suggests the committee, led by Ben Bernanke, is concerned by recent weak economic data as well as a possible knock-on effect from sovereign debt problems in the Eurozone, with committee members acknowledging the economy may need “further policy stimulus” if the outlook is to worsen.
The minutes did not detail any steps the Fed might take if it believed the economy needed more help, but officials and analysts have suggested that buying more longer-term US government debt or mortgage-related securities would be possible approaches. In June, Bernanke said the committee didn’t think the slowing in the economy seen thus far warranted new stimulative actions besides those already in place.
The Fed thinks it could take years for the economy to return to full health, the minutes showed. Officials believe an jobless rate near five per cent is consistent with “full employment” but their projections showed the unemployment rate still at about seven percent by the end of 2012.
The minutes suggest the Fed is likely to continue to hold its benchmark lending rate at near zero. The minutes hit the Dow Jone’s earlier rally, which closed at 10,366.72, up just 3.7 points.