The US Federal Reserve has cut its fiscal growth prediction for this year, citing weaker growth than expected in the first three months of the year. Chairman Ben Bernanke said he expected growth for 2011 to be between 3.1% and 3.3%, compared with the previous forecast of 3.4% to 3.9%. He also said that the fed would not pump more money into the economy after June. However he pledged the government to tackle the country’s extremely grim debt problems.
At his first press discussion, the world’s most powerful central banker also lowered the Fed’s unemployment rate prediction for this year, to between 8.4% and 8.7% from 8.8% to 9%. But he raised considerably its price rises anticipation to between 2.1% and 2.8% from 1.3% to 1.7%. He also explained that the annual growth would be lower largely due to weaker first quarter growth, which would probably be under an annualized rate of 2% due to lower defense spending, weaker exports, a weak building sector and bad weather.
Chairman Bernanke’s comments and performance were generally well-received by the markets, with the Dow Jones index closing up 95.6 points, or 0.8%, to 12,690.96. Meanwhile US economic growth slowed in the first three months of 2011 to an annualized rate of 1.8%, corresponding to a 0.4% quarterly increase.
That matches up to with a revised annual growth rate of 3.1% in the previous quarter, official figures show. US GDP is articulated as an annualized rate, or annual pace, which shows what the three months’ fiscal activity would mean if it carried on for a year. The figure is a first estimate, and could be revised either up or down.
Fiscal growth has been in a weak position by high energy prices which have weakened consumer spending. Customer spending fell to 2.7% from 4% in the previous quarter.