A new estimate by the US Federal Reserve indicates that the pace of economic growth in the United States would be much slower than expected this year and in 2011.
According to the latest estimates published by the US Federal Reserve on Tuesday, the economic growth would be around half a percentage point less than expected this year and next as the world’s largest economy scrambles to bring its soaring unemployment rate under control, AFP reported.
Recent calculations portray a grim outlook for the financial recovery in the United States, with the economy estimated to grow only by up to 2.5 percent in 2010, down from the Fed’s previous projection of 3.0-3.6 percent.
The figures also show that unemployment rate is not expected to slid below 9.5 percent this year and 8.9 percent in 2011.
The Federal Reserve has decided to buy $600 billion of long-term treasury bonds in a bid to reinvigorate the ailing economy via pumping more cash into the financial markets across the United States.
Minutes from a meeting of the Federal Open Market Committee (FOMC) and the Board of Governors of the Federal Reserve System in November suggest that the bank will fail to meet the 3.5 percent growth benchmark until 20-12 and the inflation could not be fully tamed within the same period.
The US central bank noted “only a gradual improvement in labor market conditions,” and a continued “low rate of inflation.”
Meanwhile, “some participants” at the November meeting say the Fed’s $600 billion purchase plan would have “only a limited effect on the pace of the recovery.”
However, US Federal Reserve Chairman Ben Bernanke has given a robust backing of the Fed’s stimulus plan, saying it is the antidote to the rampant unemployment and the financial woes.