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Fed lowers growth forecast, raises inflation view 22.05.2008 |
The Federal Reserve on Wednesday slashed its 2008 economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely.
"Several members noted that it was unlikely to be appropriate to ease policy in response to information suggesting that the economy was slowing further or even contracting slightly in the near term," the Fed said in minutes of its April 29-30 meeting.
In an accompanying forecast, the Fed cut its projection for economic growth to scant 0.3 percent to 1.2 percent in 2008, down from 1.3 percent to 2 percent it estimated three months ago.
At the same time, the central bank said it expects inflation to remain "elevated" and unemployment to increase "significantly."
Stocks tumbled more than 1 percent and Treasury debt prices pared losses on the Fed's forecasts. The dollar pared losses against the euro.
Fed officials believed that cutting benchmark interbank lending rates by a quarter percentage point to 2 percent at their last meeting was "a close call."
"If you had any doubt that the Fed is signaling a pause, that doubt is gone," said Christopher Low, chief economist at FTN Financial in New York.
Policy-makers felt at the time that the risks that growth could slow were more closely balanced by the risks that inflation could spike higher.
Reuters
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 Fed lowers growth forecast, raises inflation view
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