WASHINGTON - The economy's continuing struggles aren't just confounding ordinary Americans. They've also stumped the head of the Federal Reserve.
Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.
"We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."
The Fed cut its forecast for economic growth this year to a range of 2.7 percent to 2.9 percent from an April forecast of 3.1 percent to 3.3 percent. It also cut its forecast for next year to a range of 3.3 percent to 3.7 percent from an earlier 3.5 percent to 4.2 percent. The Fed also said unemployment would stay higher than it had expected.
In a policy statement issued at the end of a two-day meeting, the Fed blamed the worsening economic outlook in part on higher energy prices and the earthquake and tsunami in Japan, which slowed production of cars and other products.
But at a news conference afterward, Bernanke said the economy's troubles are more puzzling and potentially more long-lasting than a pair of temporary shocks.
The Fed's statement Wednesday stood in contrast to its more upbeat view when officials last met, eight weeks ago. At that time, the central bank said the job market was gradually improving.
Since then, the economic news has been gloomy. The government reported that the economy grew at an annual rate of only 1.8 percent in the first three months of the year.
The Fed stuck to its plan to bring an end this month to a program to help the economy by buying $600 billion in government bonds. The Fed also intends to keep short-term interest rates near zero "for an extended period," a phrase it has been using the past two years. Though the central bank noted that inflation had risen, it expected that to be temporary as well.
by Paul Wiseman and Martin Crutsinger Associated Press Jun. 23, 2011 12:00 AM
Fed chief puzzled by continuing economic woes
