America's revival will take years: Fed Reserve
America's central bank has slashed its outlook for the US economy projecting that jobless rate could exceed 8% for two more years and it could take several years for the economy to return to health.business Updated: Nov 24, 2010 12:48 IST
America's central bank has slashed its outlook for the US economy projecting that jobless rate could exceed 8% for two more years and it could take several years for the economy to return to health.
According to minutes from the Federal Reserve's November 3 meeting released on Tuesday, more than half of the central bank's policymakers thought it would take about five or six years for unemployment, growth and inflation to return to more normal levels.
Other Fed members warned the full recovery could take even longer than that.
The much weaker forecast is the major reason that policymakers decided earlier in November to announce a plan to try and jumpstart growth by pumping an additional $600 billion into the economy through the purchase of long-term bonds, according to CNNMoney.
That plan, known as quantitative easing, has been criticised by several economists, politicians and foreign central bank officials.
The Fed now expects the economy to grow between 2.4% to 2.5% in 2010, compared to an earlier forecast of growth between 3.0% and 3.5%.
The Commerce Department reported on Tuesday that the economy grew at a 2.5% in the third quarter, up from 1.7 %in the second quarter but well below the increase of 3.7% in the first three months of the year.
The Fed also trimmed its 2011 forecast to growth of between 3% and 3.6%. Its earlier estimate was for growth of 3.5% and 4.2%.
The central bank also said that the unemployment rate is now expected to average out between 9.5% 9.7% in 2010. The jobless rate was 9.6% in October.
The Fed now forecasts unemployment will only fall to between 8.9% and 9.1% in 2011 and drop to between 6.9% and 7.4% by 2013. The unemployment rate was 4.6% in 2007, the last year before the recession.
The central bank also maintained that inflation should not be a problem for the foreseeable future. Prices for consumer goods are expected to rise a little faster than in the Fed's previous estimate, but still well less than 2% through at least 2012.
The Fed has stated that price increases are now judged to be too low to maintain its goal of price stability. But some policymakers at the Fed have expressed concern that the steps the central bank is taking to stimulate growth could lead to higher inflation down the road.