July 15, 2009
The US economy will sink at a slower pace than previously thought in 2009, thanks to a rebound in the second half of the year, the Federal Reserve says.
The Fed also upped its growth forecast for 2010 and 2011.
But it warned that US unemployment would rise above 10%, which is higher than its earlier forecasts.
The Fed predicts the jobless rate could get as high as 10.1%, from its old estimate of 9.6%. In June, unemployment climbed to 9.5%, a 26-year high.
The new projections were released along with minutes from its rate-setting committee.
“Consumer spending appeared to have stabilized since the start of the year, sales and starts of new homes were flattening out, and the recent declines in capital spending did not look as severe as those that had occurred around the turn of the year,” it said.
“Moreover, it seemed likely that economic activity was in the process of levelling out, and the considerable improvements in financial markets over recent months were likely to lend further support to aggregate demand.”
The Fed now predicts the economy will shrink between 1% and 1.5% this year. The forecast issued in May projected it would contract by between 1.3% and 2%.
