The US economy will grow at a much slower pace than expected this year and next, as unemployment remains stubbornly high, according to bleak Federal Reserve estimates published Tuesday.
Painting a stark picture of the short-term fate of the world’s largest economy, minutes from the Fed’s last meeting showed that growth would be around half a percentage point less than expected this year and in 2011.
Minutes from a November meeting showed that already anemic growth predictions have been slashed to 2.4-2.5 percent this year and 3.0-3.6 percent in the next.
Unemployment is not expected to go below 9.5 percent this year and 8.9 percent in 2011.
Against this backdrop the minutes show the Fed’s top policy panel wrestling over its decision to roll out a controversial 600 billion dollar spending plan to boost the recovery.
Eying a recovery that “proceeded at a modest rate in recent months,” “most” members of the bank’s top panel agreed the measures were warranted.
Members of the Federal Open Market Committee pointed to the fact that the bank is failing in its mandate to keep unemployment rates and inflation stable, as cause to act.
The bank noted “only a gradual improvement in labor market conditions,” and a continued “low rate of inflation.”
Bank economists reported recent improvements in consumer spending,business investment in equipment and exports, but construction remained “depressed” reflecting an “exceptionally weak” housing market.
They noted “surveys taken in September and October indicated that consumers were slightly more pessimistic about the economic outlook than earlier in the year.”
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