Federal Reserve Releases Bleak Economic Forecast

The Federal Reserve has issued a worse-than-expected economic forecast. Fed officials predict the economy will deteriorate throughout 2009, with rising unemployment and no stability in the housing market.

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ARI SHAPIRO, host:

In this country, the Federal Reserve has issued a bleak economic forecast. In fact, the view is grimmer than it used to be. We have more from NPR's Wendy Kaufman.

WENDY KAUFMAN: As recently as October of last year, officials at the Federal Reserve were forecasting economic growth in 2009. Now most believe the US economy, as measured by GDP, will contract between one-half and 1.3 percent.

Mr. BRIAN BETHUNE (Senior Economist, IHS Global Insights): So that's a very significant change.

KAUFMAN: Brian Bethune is a senior economist at IHS Global Insights.

Mr. BETHUNE: The economy is contracting, and is contracting due to very weak domestic demand, but also the overseas markets have turned extremely weak.

KAUFMAN: The latest assessment released yesterday is contained in minutes from the late January meeting of the Federal Open Market Committee, that officials saw a significant risk. The economic recovery would be delayed and initially slow to catch on. On the inflation front, consumers may be heartened to hear that policymakers estimate that long-term inflation will remain low, about 2 percent. Some economists are skeptical and believe record US deficits and other factors could cause prices to spiral upward in the future, but Fed Chairman Ben Bernanke said yesterday that he expected inflation to be, quote, "quite low" for some time.

Wendy Kaufman, NPR News.

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