Page last updated at 22:47 GMT, Wednesday, 20 May 2009 23:47 UK

US economic outlook 'improving'

Federal Reserve building
The Fed said action already taken should help boost economic activity

The US Federal Reserve says it is seeing "tentative evidence" the US recession is easing despite cutting its economic growth forecast.

The Fed says it expects the economy will shrink between 1.3% and 2% this year. It had earlier said the economy could contract between 0.5% and 1.3%.

It also warned that US unemployment could reach 10%.

But the pace of economic decline was beginning to ease, the Fed said in the minutes of its meeting on 28-29 April.

"Participants agreed that the information received since the March meeting provided some tentative evidence that the pace of contraction in real economic activity was starting to diminish," the minutes showed.

They're saying the recovery itself may not be as robust as what people are talking about
Doug Roberts, ChannelCapitalResearch.com.

They also said that financial markets had strengthened and there was anecdotal evidence of a pick-up in household and business confidence.

Christopher Low, chief economist at FT Financial in New York, said the revision to the economic growth forecast reflected the magnitude of the decline in the first quarter of this year when the economy contracted by an annualised rate of 6.1%.

"The tone of the minutes is a little more optimistic, and the forecasts are a little more pessimistic," he said.

At the April meeting, the Fed decided to keep interest rates unchanged at its current low range of between zero and 0.25%.

The Fed's decision to cut its growth forecast tempered recent investor confidence that the economy was beginning to recover from the financial crisis.

US stocks reversed early gains to close lower.

"They're saying the recovery itself may not be as robust as what people are talking about," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com.

The Fed also left open the possibility of increasing its purchases of mortgage-related and government debt to boost lending and spur recovery. In March, the central bank announced a $1.2 trillion (£843bn) programme to get credit flowing.



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