US central bank predicts deeper downturn

May 21st, 2009 - 6:00 am ICT by IANS  

Barack Obama Washington, May 21 (DPA) Contradicting optimistic remarks out of the White House earlier Wednesday, US Federal Reserve officials released a gloomy projection for the rest of the year.
The Federal Open Market Committee said it anticipated a fourth-quarter contraction in the gross domestic product (GDP) of up to two percent, a drastic drop from the 1.3 percent it had projected in January.

And it said unemployment could reach 9.6 percent during the fourth quarter, compared to initial projections of a maximum of 8.8 percent. Current unemployment is 8.9 percent, the highest since 1983.

The projections were contained in the minutes of the committee’s April 28-29 meeting, which were released Wednesday.

Earlier Wednesday, US President Barack Obama and Treasury Secretary Timothy Geithner said there were signs the crisis-ridden US finance system was making strides on the way to recovery from the worst recession in decades.

The world’s largest economy was showing “some return to normalcy in certain aspects of the financial markets”, Obama said at the first full meeting with his new board of outside economic advisers.

“We’re pleased that we’ve seen some progress,” he said.

Geithner told the Senate banking committee that there were “important indications” that the financial system “is starting to heal”.

But Obama also warned that unemployment may stay high “for some time.”

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