Posted on Sep 16, 2020 at 9:18 PMUpdated Sep 16, 2020 10:44 PM
Like the OECD , the US central bank is a little less pessimistic about the economic situation. In the United States, GDP should ultimately fall “only” by 3.7% this year, according to the median forecast published wednesday by the Federal Reserve. In June , the Fed expected a decline in GDP of 6.5% this year in the United States. The rebound expected next year would therefore be a little less strong: the US economy should grow by 4% in 2021, instead of the + 5% estimated three months ago.
This revision of the economic outlook is not, however, likely to modify the Fed’s monetary policy. The central bank has, unsurprisingly, kept its key interest rates between 0 and 0.25%, but above all it clarified the time horizon during which this could apply.
“Rates will remain very accommodating”
The Federal Reserve “Expects it to be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of employment maximization, and inflation is over. at 2% and on the way to moderately exceeding 2% for some time ‘, she said in her press release, published at the end of its monetary policy committee.
“What we are saying, in effect, is that rates will remain very accommodating until the economy has largely begun to recover”, deciphered its president, Jerome Powell, during a press conference. “This should be a very powerful statement of support for economic activity”, he judged. At the end of August, Jerome Powell announced that the central bank would be ready to accept a little more inflation in periods of growth to maximize the level of employment, which is one of its mandates, before modifying its rates.
Inflation at 2% in 2023
Enough to keep interest rates at the current level until at least 2023: according to its latest economic forecasts, inflation will only increase very gradually, reaching 2% in 2023, according to the median forecast. Food products have certainly seen their prices rise since the start of the pandemic, but “Fundamentally, this is a disinflationary shock”, already indicated the president of the Fed at the end of July.
The return to an economy of full employment will take some time. The unemployment rate fell more than expected in July, to 8.4% of the labor force from 14.7% at its peak in April. The US central bank now expects an unemployment rate of 7.6% at the end of the year. It would then gradually decrease to 5.5% of the working population next year and 4% by 2023.
Half of the 22 million lost jobs have been recovered, said Jerome Powell, but the crisis remains acute for low-income service workers, women, African Americans and Hispanics. The poverty rate had reached an all-time low before the health crisis last year, at 10.5% of the population, according to Census Bureau figures released on Tuesday. However, it was 18.8% for blacks and 15.7% for Hispanics.
“The Federal Reserve is committed to using its full range of tools to support the US economy in these difficult times”, recalled the Fed, while continuing to judge that budgetary support remained necessary for the most fragile. Negotiations are still difficult between Democrats and Republicans in Congress to enact new financial support measures for activity. After Donald Trump who had decided to to free oneself from Parliament to propose some measures, the Senate with a Republican majority adopted a stimulus plan. But, deemed insufficient by the Democrats who hold the majority in the House of Representatives, it was not adopted.