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Fed Expects Longer Downturn01-08-09 | News

Fed Expects Longer Downturn

According to the minutes from that meeting of Fed policymakers, the central bank is now predicting that gross domestic product, the broadest measure of economic activity will fall in 2009. The Fed indicated that most members at its meeting expected a slow recovery to begin in the second half of the year, but that unemployment would still rise "significantly" into 2010.

The U.S. economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts from the staff of the Federal Reserve. This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to spur economic activity.

Employers cut 1.9 million jobs over the first 11 months of 2008, which took the unemployment rate up to 6.7%. The December report will be released by the Labor Department Friday and economists surveyed by Briefing.com expect a loss of 475,000 jobs and that the unemployment rate will rise to 7%, which would mark a 15-year high.

The Fed cited a multitude of problems dragging down the economy besides rising unemployment, including stock market declines, low consumer confidence, weakened household balance sheets and tight credit conditions. It said business spending is also likely to fall due to weak retail sales and the credit crunch. In addition, some members of the Fed expressed concerns that the economy could worsen even more than currently expected. ?EUR??,,????'?????<

If the current recession, which began in December 2007, lasts throughout 2009, that would make it the longest U.S. economic downturn since the Great Depression.

Source: CNN Money