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Industryweek 4642 Federalreservebldg595
Industryweek 4642 Federalreservebldg595
Industryweek 4642 Federalreservebldg595
Industryweek 4642 Federalreservebldg595
Industryweek 4642 Federalreservebldg595

Fed Scales Back Forecast for Growth, Inflation

June 19, 2013
The Fed wants to see the jobless rate at 6.5% and inflation around 2% before it begins to tighten monetary policy, currently centered on its ultra-low 0% to 0.25% benchmark interest rate.

WASHINGTON - The Federal Reserve on Wednesday trimmed its growth forecast for 2013 slightly and slashed its inflation outlook, suggesting it saw little threat to prices from its ongoing easy-money program.

The economy was expected to grow at an annual rate of 2.3% to 2.6%, slightly below the 2.8% top-end growth previously forecast.

The Fed projected inflation would come in between 0.8% to 1.2% in 2013, instead of 1.3% to 1.7% seen in March.

While overall inflation, as measured by the personal consumption expenditures price index, was sharply revised lower, so-called core inflation, excluding food and energy prices, also was seen abating.

Core PCE is now expected to rise by a mild 1.2% to 1.3%, down from 1.5% to 1.6%.

With the slow improvement in the job market in recent months, the Fed forecast the jobless rate would fall to 7.2% to 7.3% by the end of the year from the current 7.6%.

That was a slight improvement from the March prediction of 7.3% to 7.5% for year-end.

The latest forecasts suggest the economy remains too weak, four years after exiting recession, for the Fed to begin tightening its ultra-loose monetary policy.

The Fed wants to see the jobless rate at 6.5% and inflation around 2% before it begins to tighten monetary policy, currently centered on its ultra-low 0% to 0.25% benchmark interest rate.

But the outlook for 2014 was brighter. The pace of growth was raised to 3% to 3.5%, up a tenth point on both ends of the range.

The unemployment rate was seen falling to as low as the targeted 6.5%, down from 6.7% previously seen.

And inflation was still projected to rise as much as 2%, the central bank said, moving back to its objective for normalizing policy.

Copyright Agence France-Presse, 2013

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