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In April, the Federal Reserve said it expected the U.S. unemployment rate would dip below 8% this year for the first time since 2009. Today, it backtracked on that prediction.
The Fed now says that the jobless rate will remain in the 8% to 8.2% for the rest of 2012. That’s a revision from the Fed’s April forecast that the rate could dip as low as 7.8% by year’s end. The rate currently sits at 8.2%, up from 8.1% in April.
Unemployment isn’t the only area that’s dragging. The Fed also revised the country’s growth rate, saying it expects U.S. gross domestic product to grow between 1.9% and 2.4% – not the 2.4% to 2.9% range the agency expected in April.
The Fed also reduced its 2013 GDP growth expectations to a 2.2% to 2.8% range from a previously more optimistic 2.7% to 3.1% range.
The one bit of good news the Fed coughed up today is that it sees inflation as less of a threat than it previously did. Fed officials expect the core personal consumption expenditures index to rise between 1.2% and 1.7% – lower than the previous projection of a 1.6% to 2% range.
Still, the Fed was concerned about slow growth in the U.S. economy enough to extend ‘Operation Twist’ – a Federal bond buying and selling program – through the end of the year. Stocks reacted to the measure with relative indifference, ticking down only slightly.
J.C. Penney (NYSE: JCP) was one of the day’s biggest gainers, vaulting 5.6% after starting the day near a 52-week low.
Procter & Gamble (NYSE: PG) was one of Wednesday’s biggest losers, falling 3% after reporting sluggish April sales.