The Federal Reserve has cut its growth forecast for the US economy in the face of the impact of higher energy prices.
It now estimates that the US economy will expand between 2.7% and 2.9% this year, down from its April forecast of 3.1% to 3.3%.
The US central bank also warned that unemployment would remain stubbornly high throughout 2011.
Fed chairman Ben Bernanke said higher prices had hit consumer spending, but that they should start to fall.
Rates held
Mr Bernanke said: “The reduced pace of the recovery partly reflects factors that are likely to be temporary.
“In particular, consumers’ purchasing power has been damaged by higher food and energy prices. However some moderation in gasoline prices is now a prospect.”
Mr Bernanke added that the US manufacturing sector, especially the car industry, had also been hit by supply problems due to the aftermath of the Japanese earthquake and tsunami.
However, he said such supply chain disruptions were “likely to dissipate in coming months”.
The central bank’s latest economic growth estimate was released after its policy-setting Federal Open Market Committee voted unanimously to keep US interest rates on hold for the 22nd meeting in succession – as had been expected.
US interest rates have now been between 0% and 0.25% since December 2008 in an effort to boost economic growth.
The Federal Reserve said rates would probably remain at this level “for an extended period”.