The US Federal Reserve on Thursday lowered its forecast for economic growth this year, but lifted its outlook for GDP growth in 2013.
The 19 members of the Federal Open Market Committee (FOMC) predict that the US economy will grow by a modest 1.7% to 2% pace in 2012.
The US central bank sees modest improvement in GDP growth next year. In 2013, the Fed expects the world's largest economy to grow by between 2.5% and 3%.
The Fed policymakers also predicted that inflation will remain at or below its target of 2% a year, through at least 2015.
During a press conference held after the conclusion of a two-day policy meeting, Fed Chairman Ben S. Bernanke said that the idea behind the new bond-buying plan was to quicken the pace of the US economy.
But Bernanke also admitted that the Fed alone does not have the power to fix a weak job market (unemployment rate above 8%), and urged the Congress to do its part on the fiscal front.
"I want to be clear: While I think we can make a meaningful and significant contribution to reducing this problem, we can't solve it. We don't have tools that are strong enough to solve the unemployment problem," Bernanke said.
If Congress doesn't address the fiscal cliff, spending cuts and tax increases set to take effect at the beginning of 2013, the impact on the US economy could be dire, Bernanke warned.
Economists, including those at the Congressional Budget Office (CBO), have said that the fiscal cliff will push the US economy into a new recession.
"If the fiscal cliff isn't addressed, I don't think our tools are strong enough to offset the effects of a major fiscal shock," Bernanke said.
Despite prediction of a slight pick-up in the US economy next year, the acceleration is unlikely to be fast enough to boost jobs substantially.
The Fed doesn't see the unemployment rate falling below 7% until at least 2014.
"While the economy appears to be on a path of moderate recovery, it isn't growing fast enough to make significant progress reducing the unemployment rate," Bernanke said.
"The weak job market should concern every American," he added.