Fed cuts GDP forecast

The Federal Reserve slashed its forecast for economic growth, and raised its projections for unemployment on Wednesday.
Fed Chairman Ben Bernanke addressed reporters after the two-day Federal Open Market Committee:
SOUNDBITE: FEDERAL RESERVE CHAIRMAN BEN BERNANKE (ENGLISH) SAYING:
"Yes we have again downgraded the medium term forecasts. Evidently the forces, the drags on the recovery were stronger than we thought."
The economy is doing a little better than it was when the Fed last met in September, but not strong enough for the Fed to change its view that rates could stay close to zero until 2013.
Bernanke says he remains prepared to take action to make sure the recovery continues.
But there are risks, such as the housing market, where even low interest rates have failed to help.
And he also commented on the jobs market- where unemployment remains above 9 percent, most of which he believes is cyclical.
SOUNDBITE: FEDERAL RESERVE CHAIRMAN BEN BERNANKE (ENGLISH) SAYING:
"If that is the case, then monetary policy, by lowering interest rates, making financial conditions more accommodative, should stimulate demand, stimulate spending and over a period of time that should help bring cyclical unemployment down. It's also possible that some of the increase in unemployment reflects so called structural factors, mismatches between worker skills and job opportunities, loss of skills, geographical mismatch etc. And to the extent that that's the case than monetary policy is much less effective."
Regarding Europe, Bernanke said European fiscal and banking issues have contributed to strains in global financial markets and that the U.S. central bank will closely monitor developments.
Bobbi Rebell, Reuters.