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Fed sets its first-ever target for inflation
Nick Goodway19.02.09
The US Federal Reserve has set itself an inflation target for the first time as it warned that the economy is set to shrink more sharply in 2009 than it originally thought.
The central bank set a long-term estimate for inflation of 2%, which Fed chairman Ben Bernanke said "should help to better stabilise the public's inflation expectations".
He said the bank would do "everything possible within the limits of its authority" to bring financial markets back to life and pull the economy out of recession as soon as possible.
The Fed now expects America's gross domestic product to fall by as much as 1.3% this year, much greater than its last estimate in October that the economy would shrink by just 0.2%.
That deterioration in turn makes it likely that US unemployment will continue to grow, with as much as 8.8% of the workforce out of work.
Overall, the Fed extended its economic forecast time frame from its traditional three-year view to a broader five- to six-year horizon.
