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Fed trims US GDP outlook, sees lower unemployment

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(Globalpost/GlobalPost)

The Federal Reserve kept its monetary easing policies in place Wednesday as it trimmed its 2013 and 2014 economic growth forecasts for the US economy.

The Federal Open Market Committee, the Fed's policy board, said it saw economic growth rebounding to a "moderate" pace in recent months following the stall in the fourth quarter of 2012, when growth was only 0.1 percent.

Nevertheless the FOMC revised its growth forecast down slightly, to 2.3-2.8 percent this year and 2.9-3.4 percent in 2014.

At the same time it saw the unemployment rate falling slightly faster than it did in its December outlook, to 7.3-7.5 percent at the end of this year and 6.7-7.0 percent in 2014. The current rate is 7.7 percent.

While the FOMC saw the economy rebounding from the late-2012 sag, it remained cautious, saying after a two-day meeting that it "continues to see downside risks to the economic outlook."

"Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated," it said.

"Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive."

That was a reference to sharp budget cuts implemented by the government from March 1 that economists say will cut 0.5 percentage point from potential growth this year.

The Fed said it would keep in place its ultra-low benchmark interest rate of 0-0.25 percent and its quantitative easing program of $85 billion a month in bond purchases aimed at holding down long-term interest rates.

The FOMC said inflation remained subdued and most members did not foresee a rise in interest rates until 2015.

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http://www.globalpost.com/dispatch/news/afp/130320/fed-trims-us-gdp-outlook-sees-lower-unemployment-0