Fed cuts 2013-2014 US economic growth forecast

WASHINGTON, USA – The Federal Reserve cut Wednesday, September 18, its US economic growth forecasts for 2013 and 2014 as it unexpectedly left unchanged its massive monetary stimulus.

The economy was expected to grow between 2% to 2.3% this 2013, instead of the 2.3% to 2.6% range seen 3 months ago, the Fed said.

READ: Fed report finds US economy growing modestly

For 2014, gross domestic product growth was trimmed to 2.9% to 3.1%, from the June estimate of 3% to 3.5%.

The central bank’s unemployment outlook improved slightly for this 2013 and 2014.

The 2013 jobless rate was estimated between 7.1% and 7.3%, the Fed said, while in 2014 it would fall to 6.4% to 6.8%.

The central bank shaved a tenth point off both years’ low-end estimate.

Tame inflation forecasts continued to remain well below the Fed’s 2% target for price stability.

The 2013 estimate for core inflation, stripping out food and energy price changes, was unchanged at 1.2% to 1.3%. The rate was not expected to climb as high as 2% until 2015.

For the first time, the Fed provided forecasts for 2016. GDP growth would slow to 2.5% to 3.3%, while the unemployment rate would fall to 5.4% to 5.9%.

Inflation in 2016 was projected at 1.90% to 2%.

According to the updated forecasts, most Fed policy makers see the first hike in the federal funds rate in 2015.

The Federal Open Market Committee said, after a two-day monetary policy meeting, it was leaving its key rate at an ultra-low 0% to 0.25%, where it has been since 2008.

The policy makers said they would keep it in this exceptionally low range, where it has been since late 2008, as long as the unemployment rate remains above 6.5 percent and inflation does not threaten.

The first time the jobless rate was projected to come in below that threshold is in 2015, when the Fed estimates the rate will fall to 6.2% or lower. – Rappler.com