The US Federal Reserve (Fed) has kept interest rates on hold and indicated they would remain so until at least the end of 2022 as the central bank expects gross domestic product (GDP) to fall by 6.5 per cent in 2020 and bounce back to 5 per cent gain next year. The unemployment rate will fall to 9.3 per cent by December from 13.
3 per cent now, the bank feels.
The Fed, which also pledged to support the economy by buying bonds, expects the unemployment rate to reach 5.5 per cent in 2022. It “will closely monitor developments and is prepared to adjust its plans as appropriate”, according to US media reports.
“Nearly 20 million jobs have been lost on net since February,” the Fed chair Jerome H Powell told a news conference following the release of the forecast, and observed that the figure probably understates the extent of unemployment. “The downturn has not fallen equally on all Americans,” he remarked.
The Fed had skipped its quarterly economic summary in March because of the COVID-19 pandemic. Powell said that the Fed would do ‘whatever we can, and for as long as it takes’ to support the recovery and ‘limit lasting damage’ to the economy.
The US budget deficit has nearly doubled because of pandemic relief spending. It grew to a record $1.88 trillion for the first eight months of the current fiscal, the treasury department said. In May, the budget deficit grew to $399 billion, up by 92 per cent from the same month a year ago. The deficit from October last year to May this year is nearly double the shortfall for last year of $984 billion.
