The Federal Reserve slightly set its economic expectations for the end of this year and for 2021, according to the central bank’s summary of economic projections released on Wednesday.
The central bank now expects real gross domestic product to fall by only 2.4% in 2020, compared to a 3.7% decline forecast in September. The Fed also raised its real GDP forecast for 2021 to 4.2%, from the 4.0% previously expected.
Source: Federal Reserve
The Fed led by Jerome Powell estimates that the unemployment rate will drop to 6.7% this year, well below the 7.6% previously forecast. 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 buy at least $ 120 billion worth of bonds each month “until substantial progress has been made towards maximum employment and price stability targets.”
The Fed kept its inflation forecasts for 2020 unchanged at 1.2%. The FOMC now sees PCE inflation remain at 1.8% next year, slightly above its previous estimate of 1.7%.
PCE core inflation is expected to reach 1.4% this year, slightly lower than the 1.4% projection in September. Next year, core PCE inflation is estimated to reach 1.8%, compared to the September forecast of 1.7%.
The Fed decided to keep interest rates unchanged at the December meeting after reducing them to near zero at an emergency meeting in March due to the rapidly spreading coronavirus.
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