Thursday, 17 September 2020_Federal Reserve officials on Wednesday projected that they would keep interest rates near zero through 2023, as it aims to help the economy fully recover from the coronavirus pandemic.
The central bank expects the U.S. economy to shrink by 3.7 percent this year, a more optimistic forecast than its June estimate of a 6.5 percent contraction, but that number would still be much worse than 2009 — the worst year of the Great Recession — when GDP shrank by 2.5 percent.
Fed policymakers now expect unemployment to drop to 7.6 percent by the end of the year, also a somewhat more hopeful outlook than before; the current rate of 8.4 percent is already better than where Fed officials had previously thought the job market would be by December.
The central bank also shed more light on its pledge not to raise interest rates until prices begin to rise more rapidly, part of a bid to allow the unemployment rate to drop as low as possible and to avoid choking off a recovery too early.
Because the central bank has undershot its inflation target for so many years, it’s now trying to overshoot for a time so that inflation will ultimately average 2 percent.
On Wednesday, the Fed pledged not to raise rates until “inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”
That part of the statement garnered dissents from Dallas Fed President Robert Kaplan and Minnesota Fed President Neel Kashkari. Kaplan wanted to leave the Fed’s policy actions more open-ended, while Kashkari thinks the Fed should ensure that “core inflation has reached 2 percent on a sustained basis.
Source: Politico
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