Fed forecasts drop in jobless rate, moderate growth

The Federal Reserve, in a new economic projection, sees the unemployment rate easing to as low as 7.8% in the last three months this year from the current 8.2%, but economic growth this year may rise only to a middling pace of 2.4 to 2.9%.

The central bank also said Wednesday that inflation was likely to be slightly higher than previously forecast, reflecting higher oil prices. But most Fed policymakers still expect to hit their inflation target of 2% this year and in the next two years.
In January, Fed officials had projected unemployment at 8.2% to 8.5% in the fourth quarter. The improved outlook of 7.8% to 8% incorporates a sharp drop in unemployment since last summer when it was 9.1%.

Overall, officials in a statement after their two-day meeting in Washington said the economy was expanding moderately, and they reaffirmed their pledge to keep short-term interest rates at record lows through 2014.

The Fed gave no indication that additional efforts to boost the economy were coming.

The Fed’s assessment of the economy overall was little changed from its statement issued after its last meeting in mid-March.

The latest statement, however, said for the first time that there are “some signs of improvement” in the housing sector, although it remains depressed. And the central bank, while repeating that it expects economic expansion to remain moderate over coming quarters, added that the pace of growth should then “pick up gradually.”

The statement suggests that Fed policymakers made little change in their quarterly economic forecast, scheduled to be released later Wednesday afternoon, shortly before Fed Chairman Ben S. Bernanke discusses the central bank’s policies and economic outlook at a news conference.

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