US Fed: 'We got it wrong'

US Fed: 'We got it wrong'

Thursday, May 22, 2008

The US Federal Reserve has revised its 2008 growth forecast for the US economy…

The Fed cut its growth forecast for this year by to a new range of between 0.3% and 1.2%, down from the 1.3% to 2% predicted in February, and is now predicting that unemployment will rise more than it had previously expected.

The US central bank also said the jobless rate could reach 5.7%, but further interest rate cuts seem unlikely as the Fed focused on the persistent threat of higher inflation. The gloomy outlook came in minutes from the Fed's last meeting when interest rates were cut to 2% from 2.25%.

According to minutes from that meeting, Fed officials viewed this decision as a "close call". A spokesperson for the Fed commented: "Although downside risks to growth remained, members were also concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices”.

Wall Street shares tumbled after the report, with the dollar falling against the euro and the Japanese yen, and the Dow Jones falling 227.5 points to 12,601.2.

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