WASHINGTON — The U.S. economy is not likely to rebound until the second half of this year, and even then, the recovery is likely to be “unusually gradual and prolonged,” leaders of the Federal Reserve have concluded.
In a projection released Wednesday, the Fed’s policymaking arm, known as the Federal Open Market Committee, said the economy’s performance over the next three years would be weaker than had been predicted just three months ago.
During the committee’s last meeting, a few members said it may take as long as five or six years before the economy resumes a more sustainable rate of growth, according to minutes from the January meeting.
Fed officials forecast that the unemployment rate will reach as high as 8.8 percent by year’s end and continue to increase through early 2010 before tapering off. The unemployment rate is currently 7.6 percent.
The central bank has moved aggressively to blunt the impact of the downturn, in part by establishing unconventional programs designed to make credit more widely available to consumers and businesses.
Those efforts have been met with some skepticism, particularly among economists and public officials who fear the Fed is distorting markets and taking on too much risk. But in a speech Wednesday, Fed Chairman Ben Bernanke said the risk was relatively small and that the bank would become more transparent about its actions.
“Extraordinary times call for extraordinary measures,” Bernanke said at the National Press Club in Washington, promising to undo the programs as markets stabilize to avoid inflationary pressures.
Much commentary on the Fed’s new lending has focused on the risk that the Fed could lose money. Bernanke argued that that would be unlikely.
