According to the central bank’s Summary of Economic Projections released Wednesday, the Federal Reserve has slightly revised its economic outlook for the end of this year and for 2021.
The central bank now expects real gross domestic product to fall only 2.4% in 2020, while a decline of 3.7% was forecast in September. The Fed also raised its real GDP forecast for 2021 to 4.2%, from 4.0% previously expected.
Source: Federal Reserve
The Jerome Powell-led Fed estimates that the unemployment rate will fall to 6.7% this year, further below the 7.6% forecast previously. The unemployment rate should fall to 5.0% by 2021, compared to the central bank’s previous estimate of 5.5%.
The Federal Open Market Committee said in its statement Wednesday that it would continue to buy at least $ 120 billion worth of bonds each month “until substantial further progress is made toward maximum employment and price stability targets.”
The Fed kept its inflation forecast for 2020 unchanged at 1.2%. The FOMC now expects PCE inflation to hit 1.8% next year, slightly above its earlier estimate of 1.7%.
Core PCE inflation is expected to hit 1.4% this year, slightly lower than the September forecast of 1.4%. Next year, core PCE inflation is estimated at 1.8%, up from the September forecast of 1.7%.
The Fed decided in its December meeting to keep interest rates unchanged after cutting to near zero at a March emergency meeting in March due to the rapidly spreading coronavirus.
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