Following a better-than-expected February jobs report, the Federal Reserve this week released a new labor forecast that predicts the U.S. unemployment rate could fall to 6.7% by next year. Previous Fed forecasts were less optimistic, demonstrating the central bank's long-held view that employers would remain cautious in near-term hiring decisions.
"Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year," the Fed said, in a statement. "The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline."
Despite its labor forecast change, the Fed announced that it will keep interest rates near all-time lows at least until 2015. The central bank also plans to continue purchasing $40 billion of mortgage-backed securities and $45 billion of Treasury securities each month. The Fed additionally reported that inflation remains in check, with only minor concerns stemming from elevated energy costs.
Still, the Fed's economic outlook was not all positive. The central bank lowered its U.S. gross domestic product (GDP) projections, forecasting 2.3% to 2.8% growth this year, down slightly from its previous 2.3% to 3% prediction. The Fed anticipates the GDP will rise between 2.9% and 3.4% in 2014.