Washington, Nov 24 (DPA) The Federal Reserve Tuesday drastically cut its growth forecasts for the US economy and raised projections for unemployment in the coming years.
The US central bank's board also warned it could take five or six years before growth and unemployment return to a level consistent with what should be expected of the world's largest economy in the long term.
The pessimistic forecast came despite the US Commerce Department's upward revision earlier Tuesday of growth in the July-September period of this year.
The department raised its third-quarter growth projection to an annual rate of 2.5 percent, up from 2 percent estimated last month. The economy grew just 1.7 percent in the second quarter.
The Federal Reserve predicted the US economy would grow 2.4-2.5 percent this year and 3-3.6 percent in 2011. That was down from a June projection of 3-3.5-percent growth this year and 3.5-4.2 percent in 2011.
The lower growth rates mean unemployment is likely remain higher for longer, likely denting President Barack Obama's hopes that the US recovery will gather steam as he prepares for re-election in 2012.
Unemployment, which currently stands at 9.6 percent, will stay within a range of 9.5-9.7 percent this year, fall to 8.9-9.1 percent in 2011 and remain at 7.7-8.2 percent in 2012, the Fed said.
Just in June, the Fed predicted the US jobless rate would drop to 8.3-8.7 in 2011 and 7.1-7.5 percent in 2012.
The revised projections were released together with minutes of the Fed's last rate-setting meeting in early November, when the central bank announced a controversial plan to buy $600 billion in Treasury securities to help revive the economy.
Foreign governments sharply criticized the new round of monetary stimulus for pushing down the value of the dollar. But board members said the measures were justified because the US recovery in growth and the labour market was "disappointingly slow" and was "likely to remain slow", the minutes showed.
Obama, speaking at a Chrysler auto manufacturing plant in Indiana, acknowledged that the US continued to face "serious challenges", but sought to use the US car industry's revival as "signs of hope and confidence in the future".
The Commerce Department's growth revision for the third quarter was "welcome news", Obama said, "but we're going to work on making it grow faster."
The third-quarter improvement was based on better-than-expected consumer spending, exports and local government spending helped push up growth in the quarter, the Commerce Department said.
The world's largest economy grew 1.7 percent in the second quarter of 2010. The weak recovery was largely blamed for President Barack Obama's self-described "shellacking" in congressional elections earlier this month.
The lack of employment growth and very low inflation as retailers enter the holiday season prompted the US Federal Reserve to launch the controversial effort to buy up $600 billion in Treasury securities over the next eight months.
Tuesday's growth rate was the second of three quarterly estimates made by the Commerce Department.