Fed cuts US growth forecast

The Federal Reserve last night cut its growth forecast for the US and warned inflation is higher than expected, while hinting QE2 is on track to finish in June as planned.

Ben Bernanke, the chairman of the Fed, said growth was weaker than expected in the first three months of the year. As a result, he said expected growth for 2011 would now be between 3.1% and 3.3%, down from the previous forecast of 3.4% to 3.9%. The fall in GDP came as Bernanke raised inflation expectations steeply to between 2.1% and 2.8%, up from 1.3% to 1.7%. He said annual growth would be lower largely due to weaker growth in the first quarter, as lower defence spending, weaker exports, and a weaker construction sector impacted the figure. It is expected to come in under 2% on an ...