Fed lowers outlook for economy through 2011 By CHRISTOPHER S.
RUGABER, AP Economics Writer | Tue Nov 23, 2011 2:40 pm ET
WASHINGTON – Federal Reserve officials
have become more pessimistic in their economic outlook through
next year and have lowered their forecast for growth.
The economy will grow only 2.4 percent to
2.5 percent this year, Fed officials said Tuesday in an
updated forecast. That's down sharply from a previous projection
of 3 percent to 3.5 percent. Next year, the economy will
expand by 3 percent to 3.6 percent, the Fed said, also much
lower than its June forecast.
Fed officials project that unemployment
won't change much this year, averaging between 9.5 percent
and 9.7 percent. The current unemployment rate is 9.6 percent.
Progress in reducing unemployment has been "disappointingly
slow," the central bank said, according to the minutes
of its Nov. 2-3 meeting.
The darker view helps explain why the Fed
decided at its meeting earlier this month to launch another
round of stimulus. The central bank plans to buy $600 billion
in Treasury bonds over the next eight months in an effort
to lower interest rates and spur more spending.
The Fed is slightly more optimistic about
2012, in part because officials expect the bond-buying program
to have a positive impact. The economy should grow 3.6 percent
to 4.5 percent that year, a tick better than June's forecast
of 3.5 percent to 4.5 percent.
The economy will also grow 3.5 percent to
4.6 percent in 2013, the central bank said, the first time
it has issued projections for that year.
The economic outlook was prepared at the
Fed's meeting earlier this month and released Tuesday. It
reflects the views of the Fed's board of governors and its
regional bank presidents.
The jobless rate will be 8.9 percent to
9.1 percent in 2011, Fed officials predict. That's much
worse than June's projection of 8.3 percent to 8.7 percent.
By 2012, when President Barack Obama faces
the electorate, unemployment will be 7.7 percent to 8.2
percent, up from the previous forecast of 7.1 percent to
7.5 percent.
The Fed's forecasts of a slow economy with
only gradual improvement in the job market are broadly similar
to those by private economists. An Associated Press survey
of 43 leading economists last month found that they expect
the economy to expand just 2.7 percent in 2011, after growing
only 2.6 percent this year.
The unemployment rate will remain at 9 percent
by the end of 2011, the economists said.
The Fed said that data released since its
last projections showed the economy was weaker in the first
half of this year than it previously thought. The economy
grew at only a 1.7 percent annual pace in the April-June
period, much lower than the first quarter's 3.7 percent
rate.
Consumers are still holding back on their
spending, the central bank said, and recent reports on housing,
manufacturing, international trade and employment were all
weaker than expected at the June meeting.
The central bank expects prices will remain
in check. Inflation is projected to rise 1.1 percent to
1.7 percent in 2011, little changed from the previous forecast
of 1.1 percent to 1.6 percent.