Fed lowers growth, raises unemployment forecasts

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The unemployment rate has been stuck near 9 percent for more than two years. Photo Bart Everson
The unemployment rate has been stuck near 9 percent for more than two years. Photo Bart Everson

By MARTIN CRUTSINGER

AP Economics Writer

WASHINGTON (AP) _ The Federal Reserve has lowered its growth forecasts and raised its unemployment projections, suggesting the U.S. economy has a longer path to recovery.

The central bank's latest forecast released Wednesday predicts that the economy will grow just 1.6 percent to 1.7 percent for all of 2011. For 2012, growth will range between 2.5 percent and 2.9 percent. Both forecasts are roughly a full percentage point lower than the Fed's projections from June.

The unemployment rate has been stuck near 9 percent for more than two years. The Fed doesn't see that changing this year. It predicts it will fall between 8.5 percent and 8.7 percent next year. In June, the Fed had predicted unemployment would drop next year to as low as 7.8 percent.

The new forecast takes into account the substantial slowdown in growth that occurred earlier this year.

On inflation, the Fed expects consumer prices will increase no more than 2.9 percent this year _ slightly worse than June's forecast. That's largely because of a spike in food and gas prices that occurred earlier this year.

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