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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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