The Federal Reserve put out a rather gloomy forecast on Wednesday. They have lowered growth, employment and other economic indicators due to damage to the housing and credit markets.
According to the minutes of the Fed meeting on Wednesday they are very nervous that cuts up to this point aren't enough and won't be enough to keep the economy from continuing to weaken. "With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action," the minutes of the meeting showed.
The Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent. Based on those numbers Unemployment is expected to rise to 5.3%.
Clearly the economic slow-down is heavier and faster then the Government thought it could have been. I would expect the Fed to continue to cut interest rate in our to try to jumpstart the economy. However, the deeper the cuts the more likely and higher we can expect inflation to rear its ugly head!
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