Fed Pessimistic For This Year
May 24, 2008 · Print This Article
The Federal Reserve bank announced today, Wednesday, that the economic situation in America isn’t necessarily going to get better soon. Nonetheless, despite the bad news, the bank says that it is hesitant to lower interest rates any more than it already has.
The Federal Reserve has given the public access to the minutes of its latest meeting. During this meeting, the bank has decided to decrease its prediction of the economic growth America will experience during the rest of 2008. Previously, during January of 2008, the Fed thought that America’s GDP will increase by between 1.3 and 2% in 2008. As of Wednesday, May 21, the Fed opines that America’s GDP will only increase by between 0.3 and 1.2% during the course of this year.
Meanwhile, the Fed’s expectations of increase in inflation and unemployment for this year have gone up. In January, the Fed expected unemployment for 2008 to be at around 5.2%, or at 5.5% maximum. Presently, the Fed expects the rate of unemployment for 2008 to be at between 5.5 and 5.7%. As for inflation, the Federal Reserve used to believe that the personal consumption expenditures for 2008 will stay at between 2.1 and 2.4%. Since its last meeting, the Fed has adjusted its predictions by approximately one percentage point. Now, the Fed believes that personal consumption expenditures in America will be at between 3.1 and 3.4% during 2008.
Despite its grim economic forecast, the Fed says it will probably not lower America’s interest rates again. The problem with cutting rates again is the rising pressure inflation. The Fed believes that America is presently in a recession, and lowering interest rates may cause inflation to increase even more, pushing America ever further into recession.
The Dow Jones index fell by over 220 points Wednesday, after the release of the Federal Reserve bank’s announcement to the public.
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