Fed Cuts/Forecast -2: Recovery Expected To Begin In '02
27 Feb 10:08
By Rebecca Christie
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The Federal Reserve Board on Wednesday lowered its
expectations of U.S. economic growth this year, saying the nation's economy
has begun to recover but is not yet on track to make full use of its potential.
In a semiannual report to Congress, the central bank said the "central
tendency" of its top policymakers calls for the U.S. gross domestic product to
expand by 2.5% to 3% between the fourth quarter of 2001 and the fourth quarter
of 2002. That marks a decrease from the forecast of 3% to 3.25% growth the Fed
made last July.
"Federal Reserve policymakers are expecting the economy to begin to recover
this year from the mild downturn experienced in 2001, but the pace of expansion
is not projected to be sufficient to cut into the margin of underutilized
resources," the Fed said in its report.
The economy, which slipped into recession for the first time in a decade last
March, grew just 0.1% last year - well below the Fed's forecast of 3.5% to
4.5%. Most private-sector forecasters expect the economy to rebound quickly
this year.
The Fed's top policymakers indicated in their report to Congress that
inflation won't be a serious danger as the economy recovers. Inflation,
measured by the price index for personal consumption expenditures, should be
about 1.5% in 2002, they said, revising their preliminary estimate of 1.75% to
2.5%.
The unemployment rate, however, is likely to be higher than previously
thought, the Fed said. They predicted the unemployment rate will average 6% to
6.25% in the fourth quarter of 2002. That's up from an initial estimate of
4.75% to 5.25%.
-By Rebecca Christie, Dow Jones Newswires; 202-862-9249;
rebecca.christie@dowjones.com
(END) DOW JONES NEWS 02-27-02
10:08 AM |
