US Federal Reserve slashes economic forecast

The US Federal Reserve has slashed its economic forecast for this year with a fall of between 0.5% and 1.5% expected.

The forecast has been revised downwards after the Fed said in October it anticipated output of between a shrinkage of 0.2% and growth of 1.1%.

Meanwhile, the Fed’s Chairman, Ben Bernanke, said they are considering setting a specific inflation target in an attempt to drag the world’s largest economy out of a prolonged recession.

Mr Bernanke said inflation is expected to stay low due to weak global economic activity and low commodity prices.

The news comes shortly after the US Commerce Department revealed that US housing starts fell by 16.8% last month - the lowest level since the Commerce Department started collecting data in 1959.

The construction of new houses and apartments fell to an annual rate of 466,000 units in January, much less than the forecasted rate of 530,000 by analysts.

As a result of the collapse in the housing market, the US Government is to spend $275 billion (£193 billion) to prevent millions of Americans from losing their homes.

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