Federal Reserve lowers US growth forecast

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Federal Reserve lowers US growth forecast

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The US central bank has slashed its forecast for economic growth there, raised its projections for unemployment, and suggested Europe’s debt crisis poses big risks to the US economy.

The Federal Reserve’s comments on risks to growth appear to leave the door open for further stimulus measures, so-called quantitative easing, otherwise known as printing more money.

However the bank offered no direct hints it was considering fresh steps to help the economy.

Policymakers, led by Chairman Ben Bernanke, seem to be waiting to see what effect their previous moves are having.

Fed officials now expect the world’s largest economy to expand by a tepid 2.5 percent to 2.9 percent next year. Back in June it was talking about 3.3 percent to 3.7 percent.

They see the unemployment rate going no lower than 8.5 percent by the end of next year, up from the more optimistic 7.8 percent to 8.2 percent range envisioned in June.

Noting that US economic growth strengthened somewhat in the third quarter, the bank also pointed out that growth was not strong enough to create large numbers of jobs: “Nonetheless, recent indicators point to continuing weakness in overall labour market conditions, and the unemployment rate remains elevated.”

It also warned of “significant downside risks to the economic outlook, including strains in global financial markets.”

The central bank’s debate over the course of policy comes against a troubled global backdrop, with the US economy far from full health and in danger of being knocked off course if Europe fails to quell its crisis, a concern the Fed alluded to.