In an updated forecast, the Fed says it expects the economy will grow no faster than 2.4 percent this year. That's much slower than the Fed's April forecast, which projected growth as fast as 2.9 percent. And it is not much better than the 1.9 percent annual pace from the first three months of the year.
The Fed also predicts the unemployment rate will fall no lower than 8 percent by the end of the year. It currently stands at 8.2 percent. In April, the Fed said the rate could be as low as 7.8 percent at year's end.
The central bank is forecasting lower inflation. At its highest, it expects inflation to rise 1.7 percent this year, well below its 2 percent target. The decline is largely because of a steep drop in gas prices.
Most economic reports since the Fed's last meeting have pointed to a sharp slowdown in the economy. Job growth averaged only 73,000 in April and May, after average gains of 226,000 per month in the first three months of the year.
The number of people seeking unemployment benefits has risen about 5 percent in the past six weeks, and employers posted sharply fewer job openings in April compared to the previous month.
With job growth weaker and the unemployment rate still high, consumers have pulled back on spending. Retail sales have fallen for the past two months. Part of that is due to falling gas costs, but even excluding gas stations, spending barely rose in May and fell in April.
Businesses also appear to be less confident about the economy's health. They are placing fewer orders at factories, which has slowed manufacturing output. A measure of companies' investment spending has dropped for two straight months.
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