Federal Reserve, acknowledging slowdown, reins in forecasts for economic growth

[WestVirginiaRebel]

Washington Post:

The economic recovery is slowing and the outlook for next year has gotten worse, Federal Reserve Chairman Ben S. Bernanke said Wednesday, backing away from the view that the slowdown of the past few months was merely temporary.

The central bank released new economic projections that showed weaker growth in both 2011 and 2012 than had been forecast just two months ago. Despite the slowdown, the Fed said it will end a program of buying vast sums of Treasury bonds at the end of June as scheduled and gave no sign it is contemplating new action.

But Bernanke, whom markets turn to as a purveyor of economic wisdom, said the Fed had no solid answers as to why, two years into an economic recovery, growth keeps disappointing.

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said in a news conference Wednesday afternoon. He suggested that problems in the financial sector and the housing market, and with consumers trying to pay down their debt, had been underestimated. “Some of these head winds may be stronger or more persistent than we thought.”

Even as the central bank’s leaders lowered their expectations for the days immediately ahead, a different set of government economists offered a dire long-term forecast for the federal government’s fiscal health. The nonpartisan Congressional Budget Office estimated that the rising cost of Medicare, Medicaid and Social Security would, if left unchecked, lead to a national debt twice as big as the economy.
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