US Federal Reserve revises upward growth projections for US economy

The American economy continues to recover from the impact of the coronavirus Although still evolving to lower levels than before the pandemic and only in 2023 could see a recovery in the labor market, the Federal Reserve (Fed) estimated on Wednesday, which adjusted its projections upwards.

Fed, the US central bank, Therefore, it kept its low reference interest rates unchanged between 0 and 0.25%. despite improving its economic forecasts for 2020, 2021 and 2022.

The agency thus expects a decrease in US GDP of 2.4% this year and an increase of 4.2% in 2021 and 3.2% in 2022. In September, it anticipated a GDP contraction of 3.7% in 2020, before an increase of 4% in 2021 and 3% in 2022.

The beginning of Mass vaccination against coronavirus in the United States has raised hopes that the economy may begin to return to normal, But rising infections also raise fears of a new wave of business closures to reduce mobility and contain the spread of the disease.

The latest news about the vaccine is “very positive”, but the economic impact of mass vaccination is uncertain, said the president of the Federal Reserve, Jerome Powell.

“It is difficult to understand the scale and economic implications of the vaccine,” he told a news conference after the last meeting of the US Central Bank’s monetary policy committee.

Improving employment

And the Fed it has improved its employment forecasts, from an unemployment rate of 7.6% to 6.7% at the end of this year.

However, he warned that only in 2023 the unemployment rate could return to a level close to February 2020, before the outbreak of the pandemic, of the order of 3.5%.

“Economic activity and employment have continued to improve, but are still well below their levels at the beginning of the year”, took note of the Federal Reserve in its statement issued at the end of the last meeting of its monetary policy committee this year, also the last of the Donald Trump era in the White House before the arrival of Democrat Joe Biden after winning the November 3 election.

The Fed reiterated that it continues “Committed to using all available tools to support the economy in difficult times”, and said once again that the evolution of the economy “strongly depends” on the development of the coronavirus pandemic “

He also added that the health crisis will continue to weigh on economic activity and “It poses considerable risks in the medium term.”

Low rates and bond purchases

The Fed will keep rates close to zero to encourage consumption and investment huntil the economy recovers after the crisis.

The agency also said that until there is “substantial progress” in the labor market and in terms of inflation, it will also keep your bond purchases.

The Fed resumed its asset purchase program in the spring to inject liquidity into the economy and facilitate low-rate lending. It currently buys about $ 120 billion a month, divided into $ 80 billion for Treasury bonds and $ 40 billion for financial products related to mortgage loans..

Contrary to analysts’ expectations, the Fed did not mention that it will increase the duration of its bonds.

New help plan

Powell referred has delayed the new economic aid plan that lawmakers have been debating in Congress for months, shortly after the last ongoing benefits for some unemployed affected by the covid-19 pandemic expire after Christmas.

“The case for ‘a new aid plan’ is very strong,” Powell said.

“With the expiry of unemployment benefits, the expiry of moratoriums on evictions, the spread of the virus, both families and businesses need support“Economic,” he argued.

In Congress, Democrats and Republicans are currently debating a $ 908 billion aid package.

With information from AFP

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