The Fed's improved economic projections see US GDP fully rebounding by year-end 2021
Federal Reservepolicymakers expect the US to stage a full recovery in 2021, according to projections published Wednesday.
- The Federal Open Market Committee's median estimate for 2020 growth landed at -2.4%. The median expectation for 4.2% growth in 2021 fully offsets the pandemic-induced slump.
- Committee members expect the unemployment rate to fall to 5% next year from 6.7%. The rate isn't projected to reach pre-pandemic lows until 2023, according to the forecasts.
- The projections come alongside the
Fed's latest policy meeting. Central bank officials elected to hold interest rates near zero and maintain the current pace and composition of its asset purchases.
The Federal Reserve revealed new economic estimates on Wednesday that see the US
Federal Open Market Committee members expect US gross domestic product to contract 2.4% in 2020 before climbing 4.2% in 2021, according to projections published Wednesday. The forecast signals the country will fully recover to pre-pandemic levels by the end of next year. Growth is seen reaching 3.2% in 2022 and slowing further to 2.4% in 2023.The committee's median estimate for 2020 unemployment reached 6.7%, implying December's nonfarm payrolls report won't bring an improvement to the rate. The Fed then expects unemployment to drop to 5% in 2021. The rate won't return to pre-pandemic lows until 2023, when the central bank expects it to reach 3.7%.
Read more: Fund manager Brian Barish has returned more than 550% to investors over 2 decades, and he just had 2 of his best years ever. He told us how he did it - and 3 top picks for the next 5 years."The Fed has made it clear that downside risks to the economy still persist in the coming months despite what financial
Some economists expected the central bank to either adjust its asset purchases or offer new guidance for the purchase program. Such updates are at least pushed back to the
Federal Reserve Chairman Jerome Powell didn't specify which inflation or employment levels would trigger a change to its purchases. He noted in a press conference that the progress needed for an adjustment is still "some ways off."
Read more: A senior portfolio manager at a $1.3 billion sustainable investment firm shares 3 under-the-radar stocks that are poised to benefit from the race to a zero-carbon world - and breaks down why he's bullish on renewables infrastructure in particularPowell also supported Congress's moves toward passing a new stimulus bill. Lawmakers have until the end of the week to reach a compromise before the federal government shuts down. Various news outlets reported earlier Wednesday that Congressional leaders are close to approving a nearly $900 billion package that includes direct payments and aid for small businesses.
The Fed chair endorsed such action, straying from his typical reluctance to comment on fiscal stimulus.
"With the expiration of some of the unemployment benefits, the expiration of eviction moratoriums, with the virus spreading the way it is, there's a need for households and businesses to have fiscal support," Powell said. "I certainly would welcome the work that Congress is doing right now."Read more: BlackRock shares its 11 top recommendations for a 'new investment order' in 2021 - and says the pandemic should prompt investors to completely rethink how they construct portfolios
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