US Fed committee lowers 2010 economic outlook

14 July 2010 21:09  [Source: ICIS news]

HOUSTON (ICIS news)--US Federal Reserve officials lowered their expectations of economic growth for the year, citing a less favourable financial conditions stemming from European fiscal problems, according to records released on Wednesday.

The Federal Open Market Committee found that “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad,” according to a statement accompanying the release of the committee’s 22-23 June meeting minutes. “Bank lending has continued to contract in recent months," the group added.

US Fed officials projections for real GDP growth in 2010 “had a central tendency of 3.0-3.5%, slightly lower than in April,” according to a summary of the committee’s economic projections.

The FOMC’s staff said found that “while the recent data on production and spending were broadly in line with the staff’s expectations, the pace of the expansion over the next year and a half was expected to be somewhat slower than previously predicted.

“The intensifying concerns among investors about the implications of the fiscal difficulties faced by some European countries contributed to an increase in the foreign exchange value of the dollar and a drop in equity prices, which seemed likely to damp somewhat the expansion of domestic demand.”

The American Chemistry Council (ACC) also recently lowered its outlook for the US economy.

The FOMC discussed at the June meeting the possibility that further monetary stimulus measures could be needed “if the outlook were to worsen appreciably”.

The committee would “continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability,” it said.

The committee said it would maintain a federal funds target range of 0-.25%.

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