The Federal Reserve on Wednesday provided its projection for economic growth this year. They said that there will be a lot of damage from the hazards of housing slump and credit crunch. It also forecasted higher unemployment and inflation.
This updated forecast came by Federal Reserve chairman Ben Bernanke stating that the U.S. economy could continue to weaken, affecting the whole global economy.“With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action,” minutes of the Fed’s Jan. 29-30 closed door meeting showed. Due to slowing economic growth, the Fed projected that the national jobless rate will rise to 5.2 percent to 5.3 percent this year. That is higher than the central bank’s old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.
With energy prices shooting upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That’s higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent.
- Navtej Kohli
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