Fed reduces expectations, Bernanke says

WASHINGTON, Feb. 27 (UPI) -- U.S. Federal Reserve Chairman Ben S. Bernanke Wednesday said the central bank "will act in a timely manner to support growth."

In his semi-annual Monetary Policy Report to the House Committee on Financial Services, Bernanke said the Fed had downgraded several economic projections for the coming months and that "downside risks remain."

Bernanke said inflation of energy prices had exceeded the Fed's expectations and that "the economic situation has become distinctly less favorable since the time of our July report."

In spite of inflation, consumer spending and non-financial sectors of the economy remain strong, he said.

But, "the jump in the price of imported energy" contributed to an erosion of "real income and wages," he said.

The Fed now projects U.S. unemployment to reach 5.2 percent to 5.3 percent in the fourth quarter of 2008, up from July's estimates of 4.75 percent. Projections for the growth in the gross domestic product have been downgraded from 2.5 percent to 2.75 percent to "between 1.3 and 2.0 percent in 2008," he said.