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Federal Reserve cuts US growth forecast

The Federal Reserve has cut its growth forecast for the US economy due to higher energy prices.

However, Fed chairman Bernanke says the effects of this are only likely to be temporary.

The Fed estimates the economy will grow by between 2.7 per cent and 2.9 per cent this year, after forecasting growth of between 3.1 per cent and 3.3 per cent in April, and says it sees 2012 growth reaching about 3.3 per cent and 3.7 per cent.

It also confirmed that it would complete its latest $600bn quantitative easing programme by June 30, with a total of $2.3tr pumped into the economy. It announced no new measures to boost the economy.

The announcement follows the central bank’s decision to keep interest rates on hold the 22nd month in a row. Rates have been between 0 per cent and 0.25 per cent since December 2008, and the Fed says rates will probably stay at that level for “an extended period”.

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