US Federal Reserve slashes growth forecast

The Federal Reserve on Wednesday sliced its forecast for US economic growth this year and next, citing slower growth in business investment and the still-depressed housing sector. The Fed projected growth for this year in a range of 2.2-2.7 percent, and 2.8-3.2 percent in 2013. In its November economic projections, the central bank had estimated gross domestic product growth of 2.5-2.9 percent for 2012, and 3.0-3.5 percent for 2013. The policy-setting Federal Open Market Committee also set an inflation target at 2.0 percent, signaling the level of price increases at which it could begin tightening monetary policy. "Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored," the FOMC said, as it said it expected to keep its key interest rate near zero for three more years. The Fed said it is "firmly committed" to its statutory mandate from Congress "of promoting maximum employment, stable prices, and moderate long-term interest rates." Following recent improvements in the troubled labor market, the FOMC lowered its unemployment rate projections to 8.2-8.5 percent for the fourth quarter. The November estimate was for a rate of 8.5-8.7 percent. The jobless rate has fallen for four consecutive months, to 8.5 percent in December, amid a fragile recovery from deep recession. The inflation forecasts were also at or below the new target level for the next three years.