Goldman Sachs has cut its second-quarter economic growth estimate to 2 percent from 3 percent due to high unemployment, weaker manufacturing data and economic sluggishness in general.
Weak economic indicators and economic sluggishness in general mean the Fed will probably stick with its current loose monetary policies.
|Fed Chair Ben Bernanke
(Getty Images photo)
"The Federal Open Market Committee is therefore stuck between a rock (slow growth) and a hard place (higher inflation)," Goldman economist Sven Jari Stehn writes in a research note to clients, according to CNBC.
"We expect Chairman (Ben) Bernanke to indicate at Wednesday’s FOMC press conference that there is little prospect of either monetary tightening or monetary easing anytime soon."
Goldman is still expecting the economy to pick up some time in the third quarter, for now.
"At this point, we still expect a bounce back in Q3 and beyond, but will need to see significant improvement in the data over the next few weeks to maintain that view," Stehn says.
Goldman Sachs isn't the only one cutting U.S. growth estimates.
The International Monetary Fund, a multilateral lending institution, recently lowered its 2011 growth forecast to 2.5 percent from 2.8 percent.
Leaders in the U.S. and Europe have to solve their debt problems to better ensure greater economic stability.
"You cannot afford to have a world economy where these important decisions are postponed, because you're really playing with fire," says Jose Vinals, director of the IMF's monetary and capital markets department, according to Reuters.
"We have now entered very clearly into a new phase of the (global) crisis, which is, I would say, the political phase of the crisis."
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