updated 6/8/2005 6:14:46 PM ET 2005-06-08T22:14:46

The Bush administration on Wednesday issued a slightly less optimistic forecast for the country’s economic growth and inflation for the rest of the year but predicted a solid increase in new jobs.

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The White House is predicting that gross domestic product will grow by 3.4 percent as measured from fourth quarter to fourth quarter. That’s down a tad from the administration’s December projection of a 3.5 percent increase. Last year, the economy grew by 3.9 percent.

Gross domestic product measures the value of all goods and services produced within the United States and is considered the broadest barometer of the nation’s economic health.

The administration also believes the economy will expand by 3.4 percent in 2006, unchanged from its previous estimate.

The administration’s figures — in line with many private economists’ forecasts — represent a respectable pace of growth for the economy, analysts said. Some private economists have slightly lowered their projections for economic growth this year to reflect the toll of high energy prices.

Harvey Rosen, chairman of the Council of Economic Advisers, acknowledged that high energy prices have “created some headwinds for the economy.” Nevertheless, “the economic expansion is expected to continue at a healthy and sustainable pace,” he said.

Those high energy prices are a factor in the administration pushing up its inflation forecast for this year, Rosen said.

Consumer prices are now expected to rise by 2.9 percent this year, as measured by the fourth quarter of the previous year. That’s up from the White House’s previous forecast of a 2 percent rise. Last year, consumer prices went up by 3.4 percent.

Oil prices surged to a closing high of $57.27 a barrel in early April. They have retreated a bit and are now hovering below $53 a barrel.

For 2006, the administration is forecasting consumer prices to rise by 2.4 percent. That’s up slightly from its previous estimate of a 2.3 percent advance but would represent a moderation from the administration’s 2005 projection.

On the jobs front, the administration is predicting employment will rise by 2.1 million this year to an annual average of 133.6 million. That’s roughly the same projected increase in employment as made in December. Next year, another 2.2 million new jobs are expected to be generated to boost annual average employment to 135.8 million.

To keep inflation from becoming a problem for the economy, the Federal Reserve has boosted short-term interest rates eight times since June 2004. Economists believe another rate increase will come at the Fed’s next meeting June 29-30.

Even with the Fed’s increases in short-term rates, longer-term rates have stayed low. That has puzzled Federal Reserve Chairman Alan Greenspan. The administration is predicting the yield on 10-year Treasury notes — which influence 30-year and 15-year mortgage rates — will average 4.3 percent this year, the same as last year.

Ken Mayland, president of ClearView Economics, said the administration’s overall projections paint a “picture of an economy that is performing pretty well, not superbly well, but pretty well. If you were to grade it, I would say it is a solid ‘B’ overall.”

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