US central bank raises 2010 forecast

| November 25, 2009 | 0 Comments
US central bank raises 2010 forecast

The US central bank, the Federal Reserve, yesterday lifted its outlook for economic growth in 2010 to a range of 2.5% to 3.5%.

The forecast was raised marginally from its July estimate of between 2.1% and 3.3%, indicating that the US expects unemployment to ease early next year. Currently, the US unemployment rate is at 10.2%.

The forecast accompanied minutes from the Federal Reserve policy meeting, held on November 3rd and 4th, at which it held interest rates at the record low of close to zero.

“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.

The Fed expects unemployment to fall to a rate of between of 9.3% to 9.7% over the course of the next 12 months. However, unemployment is expected to remain high with a range of between 8.2% to 8.6% in 2011.

Yesterday, the Commerce Department revealed that the US economy grew at a far slower rate in the third quarter than previous estimates showed.

According to official figures, the US economy expanded by 2.8% between the July and September period, rather than the 3.5% previously reported and just under the 2.9% analysts had expected.

Analysts are fearful of a fragile recovery within the US and the economy could slump again due to high unemployment, which knocks consumer confidence and spending.

Consumer spending makes up for more than two-thirds of overall economic activity in the US, so weak spending in the build-up to Christmas could be a worry for the world’s largest economy.

The third quarter growth reflected this as more than half of this spending growth came from vehicles and parts sales, which were boosted by the Government’s “cash for clunkers” scheme.

This has now expired with many suggesting that the strong growth will not be repeated in the fourth quarter.

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