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The Fed a Little More Bearish

The Federal Reserve lowered its forecast for the nation's economic performance this year, saying it will actually shrink and unemployment will rise higher. The Fed now believes the economy will contract in 2009 between 0.5% and 1.3%, compared to a prior forecast (in November) which said the economy could range from 0.2% contraction to 1.1% expansion. It also thinks the unemployment rate will go up to 8.5%-8.8% this year, up from the prior forecast of 7.1% to 7.6%. If the Fed's new predictions prove accurate, it would mark the weakest annual showing since a 1.9% drop in economic activity in 1982. The Fed forecast calls for the jobless rate to dip to between 8% and 8.3% in 2010, and to between 7.5% and 6.7% in 2011. Under the Fed's new projections, the economy should grow between 2.5% and 3.3% next year. Fed officials also predicted the economy would grow more robustly in 2011, rising by as much as 5%. However, the forecast was not unanimous. Some Fed officials believe the turnaround could take five or six years.

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Date Last Updated: 02/26/2009