Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Fed raises growth forecast for 2011

By Charles Riley, staff reporter


NEW YORK (CNNMoney) -- Minutes from the most recent meeting of the Federal Reserve released Wednesday show that policymakers anticipate a bigger bump in economic growth for 2011 than they thought just a few months ago.

The Fed estimates that the nation's gross domestic product will rise between 3.4% to 3.9% in 2011, up from its November estimate of an increase of 3.0% to 3.6%.

The minutes attribute the change to stronger than expected data on production and spending. But the Fed said the acceleration in growth will mainly be limited to the short-term, as growth estimates for 2012 and 2013 were only slightly adjusted.

The projections are largely in line with language used by the Fed to describe the economy at large. Fed members said the economic recovery is "on a firmer footing" and they expressed greater confidence that the recovery would be "sustained" and "gradually strengthen over coming quarters."

The Fed also revised its unemployment estimates for 2011 as well as the next two years. But its new forecast of a jobless rate between 8.8% and 9% at year's end is only slightly lower than the current unemployment rate of 9% in January.

Fed members did express some doubts about consumer spending though. According to the minutes, some policymakers noted that while consumer spending, especially on automobiles, was strong in the fourth quarter, those levels may not be sustainable.

At the same time, the Fed noted that if consumer spending levels remain elevated, domestic demand could rebound more quickly than anticipated and "a considerably stronger economic recovery could take hold."

The Fed sees a few other problem areas lurking in the economy as well.

Members expressed concerns about possible spillover effects from the banking and fiscal worries in Europe. The Fed also cited budget problems for state and local governments and continued weakness in the housing market negative factors.

The minutes were from the Fed's first meeting of 2011, when the central bank decided to leave interest rates unchanged near historic lows and continue with its $600 billion bond buying program to stimulate the economy.

The anticlimactic decision was unanimous among all 11 members of the Fed's voting committee, including the four newest voters. To top of page

Index Last Change % Change
Dow 16,390.23 38.85 0.24%
Nasdaq 4,748.46 -1.52 -0.03%
S&P 500 1,954.04 -17.36 -0.88%
Treasuries 2.17 -0.02 -1.14%
Data as of 3:18pm ET
Company Price Change % Change
Bank of America Corp... 15.97 0.12 0.75%
Apple Inc 110.87 -1.47 -1.31%
Freeport-McMoRan Inc... 10.13 0.23 2.29%
Intel Corp 29.16 0.56 1.97%
Netflix Inc 102.19 -3.25 -3.08%
Data as of 3:03pm ET
Sponsors

Sections

Americans are transforming how they eat -- paying more attention to the origins of their food and how it's made. And Kimbal Musk is at the forefront of a movement that is accelerating the rate of change. More

Pimco's famous fund once managed by star manager Bill Gross has less than $100 billion in management for the first time since 2007. More

The BauBax travel jacket, with 15 built-in features, needed $20,000 on Kickstarter, but got $9 million. More

Pimco's famous fund once managed by star manager Bill Gross has less than $100 billion in management for the first time since 2007. More