Fed Lowers Economic Forecast

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Fed Lowers Economic Forecast
Feb 20 02:03 PM US/Eastern
By JEANNINE AVERSA
AP Economics Writer

WASHINGTON (AP) - The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.

The updated forecasts come amid worry by Federal Reserve Chairman Ben Bernanke and his colleagues that the economy could continue to weaken, even after their aggressive interest rate cuts in January, according to minutes of those private deliberations released Wednesday.

"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.

The Fed at that session voted to cut a key interest rate by one-half percentage point to 3 percent at that meeting. Just eight day earlier, the Fed, in an emergency session, slashed its rate by a rare three- quarters percentage point. The two rate cuts together marked the most dramatic rate reductions in a single month by the Fed in a quarter century.

Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.

GDP is the value of all goods and services produced within the United States and is the best barometer of the country's economic fitness.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP)­Federal Reserve policymakers are forecasting slower economic growth, higher unemployment and higher inflation. The revised forecast for the rest of the year reflects their concern that the economy could continue to weaken even after aggressive interest rate cuts.

In documents released Wednesday, the Fed said it believes that the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth­which was estimated then to be between 1.8 percent and 2.5 percent.

GDP is the value of all goods and services produced within the United States and is the best barometer of the country's economic fitness.

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