Fed lifts 2010 growth outlook, sees unemployment easing
Posted: 25 November 2009 0313 hrs

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WASHINGTON: The Federal Reserve on Tuesday raised its outlook for US economic growth in 2010 to a range of 2.5 to 3.5 percent, and said unemployment appeared to be near a peak.

In a new forecast accompanying minutes from the Fed's policy meeting on November 3-4, the central bank said participants "anticipated that economic recovery would be gradual, with real gross domestic product (GDP) growing at a moderate pace and the unemployment rate declining slowly over the next few years."

The range for 2010 growth was boosted slightly from a July forecast of between 2.1 and 3.3 percent.

The new forecast also suggests that unemployment, which hit 10.2 percent in October, could ease in early 2010.

"Participants generally anticipated that the unemployment rate would rise somewhat further during the final months of 2009 and then decline steadily over the next few years," said the forecast accompanying minutes from the Federal Open Market Committee meeting.

The new forecast indicates unemployment would drop to a range of 9.3 to 9.7 percent over the course of 2010.

The US economy expanded in the third quarter at a pace of 2.8 percent, according to government data released earlier Tuesday, in the first growth after four quarters of decline and the worst recession in decades.

Yet many economists say a recovery could be derailed by high unemployment, which hurts consumer confidence and income and cuts into spending that drives much of economic activity.

Fed members said the economy has suffered lasting damage from the crisis that would take many years to recover.

"Most participants anticipated that about five or six years would be needed for the economy to converge fully to a longer-run path characterised by a sustainable rate of output growth and by rates of unemployment and inflation consistent with their interpretation of the Federal Reserve's objectives," the Fed said.

"However, some participants indicated that the convergence process might well require even longer, while a few expected that although inflation would settle at its longer-run rate in the next several years, the convergence process for the real economy was likely to occur over a somewhat longer period." - AFP/de