In a word: Grim. That’s the crux of the Federal Reserve’s economic outlook for the next three years, with 1.8% to 2.5% growth forecast for 2008 and a slow gathering of momentum in 2009 and 2010, the Financial Times reports. And key factors from credit surprises to unexpected fourth-quarter losses in the stock market could send the economy spiraling.
Inflation, the Fed said in its inaugural economic forecast, will stay below 2%, and unemployment will peak near 4.9%. Minutes from the Fed’s October meeting showed officials reluctantly cut rates last month, calling the .25% reduction “additional insurance,” indicating it was reluctant to cut rates again. The dollar fell against the yen and strained toward new lows against the euro.