Fed’s forecast for economy gets gloomierWASHINGTON - The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing dam

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Revises ’08 prediction with slower growth, higher unemployment, inflation

WASHINGTON - The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.

The updated forecasts come at a time Federal Reserve Chairman Ben Bernanke and his colleagues are concerned the economy could continue to weaken, even after their aggressive interest rate cuts in January, according to minutes of those private deliberations released Wednesday.

“With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action,” according to minutes of the Fed’s Jan. 29-30 closed door meeting.

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With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent and 5.3 percent this year. That is higher than the central bank’s old forecast for the rate to climb as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.

And, with energy prices heading upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That’s higher than its old forecast for inflation, which was estimated at around 1.8 percent to 2.1 percent.

http://www.msnbc.msn.com/id/23258104/