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Federal Reserve takes action to boost 2013 economic forecast

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By Annalyn Censky

NEW YORK (CNNMoney) — The Federal Reserve took dramatic action to boost the U.S. economy Thursday, while lowering the forecast for growth this year. But at the same time, the central bank also raised its outlook for 2013.

The 17 members of the Federal Open Market Committee predict the economy will grow only 1.7% to 2% this year, which would hardly be an improvement over last year’s pace. But in 2013, they expect the economy to grow between 2.5% to 3%.

Even at that rate, growth would still not be strong enough to boost hiring.

The Fed sees the unemployment rate staying above 8% through the end of this year, and not falling below 7% until at least 2014.

The unemployment rate has fallen recently, but not for the right reasons. Fewer Americans are participating in the job market.

Meanwhile, the Fed also predicts inflation will remain at or below its target of 2% a year, through at least 2015.

Earlier Thursday, the Fed announced it plans to buy $40 billion a month in mortgage-backed securities, in a controversial policy known as QE3. It also said it expects the economy to be weak enough to warrant “exceptionally low” interest rates until at least mid-2015.

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