Business

Fed expresses modest optimism but slices growth outlook

WASHINGTON — Federal Reserve officials Wednesday refrained from taking new steps to charge up the economy as they expressed some modest optimism about the recovery and continued to debate ways to bring unemployment down without stoking inflation.

Meanwhile, Fed Chairman Ben Bernanke, in a news conference after the Fed announcement, offered little hope for a pickup in US growth after years of economic weakness, saying the pace of progress is “likely to be frustratingly slow.”

The Federal Open Market Committee (FOMC), the Fed’s decision-making body, voted nine to one to leave their easy-credit policies unchanged for the first time since August, citing an economy that has “strengthened somewhat in the third quarter.”

Fed officials said indicators continue to point to weakness in the jobs market. At the same time, the central bank signaled little concern over inflation, which it sees slowing after a commodity-driven price spike in the first half of the year. Long-term inflation expectations have “remained stable,” the central bank said.

At the afternoon news conference, Bernanke said there are “significant downside risks to the economic outlook.”

“Most notably, concerns about European fiscal and banking issues have contributed to strains in global financial markets” and are “likely to have adverse effects on confidence and growth,” Bernanke said.

Fed officials Wednesday also lowered their growth forecast from one issued in June, and they predicted US unemployment could remain above seven percent through 2014.

The Fed projected the economy will expand by about 2.7 percent in 2012, 3.3 percent in 2013 and 3.5 percent in 2014, after growing by between just 1.6 percent and 1.7 percent this year. In June, the central bank had forecast gross domestic product would rise by about 2.8 percent this year, 3.5 percent in 2012 and 3.9 percent in 2013. No 2014 prediction was provided in June.

The FOMC also reiterated that US short-term interest rates are likely to remain close to zero at least through mid-2013, a move that was first announced in August.