Federal Reserve foresees lower US unemployment and inflation this year and next

WASHINGTON – The Federal Reserve expects the U.S. unemployment rate to fall faster this year and next than it did in March.

The Fed now predicts unemployment will fall to 7.2 per cent or 7.3 per cent at the end of 2013 from 7.6 per cent now. It thinks the rate will be between 6.5 per cent and 6.8 per cent by the end of 2014, better than its previous projection of 6.7 per cent to 7 per cent.

The 6.5 per cent level is significant because the Fed has said it plans to keep the short-term interest rate it controls near zero at least until unemployment falls that low. The Fed thinks that level could be reached by the end of next year.

It also expects inflation to dip even further below its 2 per cent target.