Fed Gives Dismal Economic Outlook

On Wednesday, the same day ""President Obama announced"":http://dsnews.comindex.php/home/news_story/2576 the government's most aggressive effort yet to ignite a housing recovery, the ""Federal Reserve"":http://www.federalreserve.gov diminished its economic outlook for 2009 and warned that the U.S. economy would face an ""unusually gradual and prolonged"" year ahead.
Just the day before, on Tuesday, the president signed a sweeping ""$787 billion dollar stimulus"":http://dsnews.comindex.php/home/news_story/2567 package expected to create or save 3.5 million jobs, give tax breaks to every working American, and boost a broad array of industry sectors across the nation's economic spectrum. White House officials have said the two efforts - the housing plan and the stimulus package - will work in tandem to bring much needed stability to the U.S. economy.
Still, the central bank said it expects the economy to continue its contraction, shrinking by 0.5 percent to 1.3 percent this year. The Fed also warned that unemployment, which reached 7.6 percent last month, would continue to rise to 8 percent ""for sure"" and would likely reach 8.5 percent to 8.8 percent by year-end. The central bank offered projections for longer term inflation, which it expects to be 1.7 to 2 percent - marking the first time the Fed has ever included an inflation target in its economic outlook.
Also for the first time, the Federal Reserve Bank released long-term growth projections, going beyond its traditional one- to three-year forecasts. Committee members said that they expect the U.S. economy to grow by 2.5 to 2.7 percent annually over the next five to six years. They also predicted that unemployment rates will hover near 5 percent in the longer term.
Speaking at the National Press Club on Wednesday, the first time that a Fed chairman has fielded questions from journalists in a public forum, the _""New York Times"":http://www.nytimes.com_ said Federal Reserve Chairman Ben Bernanke defended the central bank’s recent efforts to combat the national recession and tried to ease concerns that it had been printing money at a dangerous pace.
Bernanke said, ""The Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability.""
Bernanke told the reporters gathered in Washington that he supported the president's overarching stimulus, but he declined to comment on any specifics within the package or on the Housing Affordability and Stability Program announced by Obama just hours before.