DJ Fed Sees Slower US Econ Growth

DJ Fed Sees Slower US Econ Growth, Rising Price Pressure In '08
2008-02-20 14:04 (New York)Maya Jackson Randall of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--U.S. Federal Reserve officials in their latest forecast recognize an unwelcome mix of slower economic growth and rising price pressures in 2008.

Members of the Federal Open Market Committee, in a forecast released Wednesday, lowered their forecast for gross domestic product this year to 1.3% to 2.0%. In October, they had forecast a range of 1.8% to 2.5%. At the same time, the central tendency for core inflation was revised up, with officials now expecting core inflation in 2008 to range between 2.0% and 2.2%. Officials had predicted a range of 1.7 to 1.9% in October. Similarly, PCE inflation was revised up to 2.1% to 2.4% from a range of 1.8% to 2.1%. Fed officials said inflation could tick even higher if energy and commodity prices were to weigh on consumers more heavily than expected. They also recognized a risk that elevated rates of inflation could persist for longer than anticipated or that the central bank's easing campaign would be misinterpreted to reflect "less resolve among committee members to maintain low and stable inflation." Officials also revised higher the unemployment rate. They now see it ranging from 5.2% to 5.3% after projecting a range of 4.8% to 4.9% in October.

The severity of the housing downturn, tightening in the credit markets and
sky-high oil prices were all factors leading to the cloudier outlook, officials
said in the quarterly economic summary in the minutes of the central bank's
January meeting.

Still, officials expect a turnaround in the US Property Market and lower interest rates to buoy economic growth after 2008.