The Federal Reserve said on Wednesday it saw slower growth in the US economy than previously expected this year, highlighting a rise in unemployment and increasing inflation.

In quarterly projections released after a Fed policy-setting meeting, the central bank lowered its estimate of gross domestic product growth to a range between 2.7 percent and 2.9 percent.

That was sharply weaker than the 3.1 percent to 3.3 percent pace reported in the Fed's estimates in late April.

The latest economic projections were released after the Federal Open Market Committee wound up a two-day meeting unanimously deciding to keep monetary policy, including near-zero interest rates, on hold.

"The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee expected," the FOMC said, citing factors such as higher energy prices as likely temporary.

The US economy grew at only a 1.8 percent annual rate in the first quarter, and economists forecast a similar pace for the second quarter.

The Fed said it saw unemployment in the year rising at a rate between 8.6 percent and 8.9 percent, compared with an 8.4-8.7 percent projection in April.

After several months of decline, the unemployment rate ticked up to 9.1 percent in May as the weak economic conditions left employers reluctant to hire.

Inflation would rise to an annual rate between 2.3 percent and 2.5 percent, the Fed said, though it lowered its upper-end projection. The prior estimate was between 2.1 percent and 2.8 percent.

Core inflation - excluding energy and food prices - would hit between 1.5 percent and 1.8 percent, an increase of 0.2 percentage points from the prior estimate.

The FOMC had noted that a recent pickup in inflation was mainly due to higher prices for some commodities and imported goods, as well as the recent supply chain disruptions from the Japan tsunami and nuclear disaster.

channelnewsasia.com