Fed cuts growth forecast, boosts jobless rate estimates
The Fed on Wednesday cut its forecasts for economic growth and boosted its estimates of unemployment.
In revisions to its June forecasts, the Fed now forecasts that growth in real gross domestic product will be in a range of 2.5% to 2.9% in 2012, down from the previous estimate of 3.3% to 3.7%.
Growth in 2013 is likely to be in a range of 3.0% to 3.5%, the Fed said, down from the previous estimate of 3.5% to 4.2%.
GDP grew at a 2.5% annualized rate in the third quarter, a pickup from the 1.3% rate of the second quarter but a moderate pace at best.
The unemployment rate, now 9.1%, won’t come down significantly next year, according to the Fed’s new estimates. The central bank expects the jobless rate to be in a range of 8.5% to 8.7% in 2012, up from the previous forecast of 7.8% to 8.2%.
In 2013 unemployment is likely to be in a range of 7.8% to 8.2%, up from the prior estimate of 7.0% to 7.5%, the Fed said.
“We did overestimate the pace of recovery,” Bernanke said at a news conference following the Fed’s two-day meeting.
The Fed’s estimates are its “central tendency” expectations.
In its post-meeting statement Wednesday, the Fed didn't announce any new initiatives to help the economy, but Bernanke made clear at the news conference that the Fed stands ready to do more if necessary.
-- Tom Petruno
Photo: A police officer on guard outside the Federal Reserve building in Washington. Credit: Brendan Hoffman / Getty Images