Hold on to your tuckus, boys and girls. It is going to get much bumpier. The Federal Reserve’s latest forecasts for the U.S. economy are gloomier than the ones released three months earlier, with an expectation for higher unemployment and a steeper drop in economic activity. The Fed’s forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%. The Fed also now expects the gross domestic product, the broadest measure of the nation’s economic activity, to post a drop of between 1.3% and 2% this year. It had previously expected only a 0.5% to 1.3% decline. No word about inflation from our monetary gurus who have tossed about $8 trillion into the economy of worthless paper. They say they are keeping interest rates near zero in order to try and goose lending but they are not optimistic about the near term. They expect the economy to expand the second half of this year but not enough to close the gap. With unemployment still going up, it is hard to imagine much of a recovery this year which is why they lowered their growth forecasts for 2010 and 2011. This is very bad news for Obama whose rosy economic forecasts were already in the toilet and the budget deficit, dependent on economic growth to come down, will likely be a lot larger than Obama is predicting. Scary. Just plain scary.

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