Fed raises its financial outlook barely, sees 4.2% progress subsequent yr and 5% unemployment price
The Federal Reserve has slightly raised its economic expectations for the end of this year as well as for 2021, according to the central bank’s summary of economic forecasts released on Wednesday.
The central bank now assumes that real gross domestic product will only fall by 2.4% in 2020, compared to a 3.7% decline forecast in September. The Fed also raised its forecast for real GDP in 2021 from previously expected 4.0% to 4.2%.
Source: Federal Reserve
The Fed, led by Jerome Powell, estimates that the unemployment rate will fall to 6.7% this year, further below the 7.6% forecast previously. The unemployment rate is expected to fall to 5.0% in 2021, compared to the central bank’s previous estimate of 5.5%.
The Federal Open Market Committee said in a statement on Wednesday that it would continue to purchase bonds valued at at least $ 120 billion each month “until substantial further progress is made in meeting the committee’s maximum employment and price stability targets.”
The Fed kept its inflation forecast for 2020 unchanged at 1.2%. According to the FOMC, PCE inflation is now 1.8% next year, slightly above the previous estimate of 1.7%.
Core PCE inflation is expected to be 1.4% this year, slightly below September’s 1.4% forecast. Core PCE inflation is estimated at 1.8% next year, compared with the September forecast of 1.7%.
The Fed decided to keep interest rates unchanged at its December meeting after cutting them to near zero in an emergency meeting in March due to the rapidly spreading coronavirus.
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