Fed predicts US GDP decline, promises to keep rates near zero

Fed predicts US GDP decline, promises to keep rates near zero

Fed predicts US GDP decline, promises to keep rates near zero

But the projections are the first issued since December, and offer policymakers' views on how fast employment and economic growth might recover, and an initial steer on how long the federal funds rate will be pinned down. Gold marched higher following the announcement. The Dow Jones and S&P 500 indexes saw modest rises after the move was announced, erasing losses from trading earlier Wednesday, CNBC reports.

The Fed responded to the pandemic by taking a range of extraordinary actions to support the economy, including slashing interest rates to near-zero, purchasing an unlimited amount of Treasurys and launching crisis-era lending facilities to ensure that credit flows to households and businesses.

Mr Powell said the FOMC had received a briefing on yield-curve control - a strategy to cap Treasury yields out to a specific maturity - and told reporters that such discussions will continue at upcoming meetings. This follows The National Bureau of Economic Research announcing Monday that the US officially entered a recession in February, putting an end to the record economic expansion that followed the 2008 financial crisis.

Officials forecast the US unemployment rate would fall to 9.3 per cent in the final three months of the year from 13.3 per cent in May, according to median estimates, and to decline to 6.5 per cent in 2021. Nevertheless, projections for 2021 show the Fed expects a rebound in GDP with a positive 5.0% figure.

The Fed is widely expected to maintain its current policy of keeping interest rates low and providing maximum liquidity to markets in the wake of coronavirus shutdowns.

During the press conference Chair Powell noted the challenges presented by the COVID-19 pandemic and stated that policy decisions will remain flexible in response to the ever changing situation. And it said almost all its policymakers foresee no rate hikes through 2022.

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