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Fed Cuts U.S. GDP Forecast

By BridgeNews As broadly expected, the Federal Reserve's policy-making Federal Open Market Committee lowered significantly its projection for U.S. economic growth this year, pushing it down to 2% - 2.5% from its forecast last July of 3.25% - 3.75%. The FOMC also pegged the unemployment rate to rise to around 4.5% from the earlier estimate of 4.0% - 4.25%. As for inflationary pressure, the Fed lowered its estimate of inflation, as measured by the personal consumption expenditures price index published by the Commerce Dept., to 1.75% - 2.25% from its July estimate of 2.00 - 2.50%. The downward revision confirms that the central bank is less concerned about potential increases in inflationary pressure in coming months, which would give it more room to proceed with further monetary easing. The FOMC's overall assessment of the U.S. economy is in line with its recent actions, namely by slashing key interest rates by a full percentage point during January. The Fed took markets by surprise on Jan. 3 when it cut the federal funds target rate by 50 basis points between policy meetings, which was then followed by a subsequent 50-basis-point cut on Jan. 31.

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