Washington, Nov 25 (DPA) The US Federal Reserve Tuesday raised its growth forecasts for the US economy, but warned that unemployment in the US will remain for some time at its highest levels in a generation.
The US central bank projected the world’s largest economy will shrink 0.1-0.4 percent this year and grow by 2.5-3.3 percent in 2010. That compares to June’s prediction of a contraction of 1-1.5 percent in 2009 and a gain of 2.1-3.3 percent next year.
But the sluggish recovery will not be strong enough to make a major dent in unemployment, which stood at a 26-year high of 10.2 percent in October. The Fed said the jobless rate will fall to 9.3-9.7 percent in 2010, roughly in line with its June forecast.
The US economy grew at an annual rate of 2.8 per cent in the third quarter, according to an updated government estimate released earlier Tuesday, marking the end of the country’s worst recession since the Great Depression of the 1930s.
The Fed attributed its more optimistic figures to stronger demand from consumers. But it also noted that the outlook remained gloomy for many households, especially as massive public spending measures to prop up the economy are likely to be phased out next year.
“Uncertain job prospects, slow income growth and tight credit, as well as wealth levels that remained relatively low despite the recent rise in equity prices and stabilization in house prices, were seen as weighing on consumer confidence and the growth of consumer spending for some time to come,” the Fed said in the minutes of its last board meeting in early November.
