Coronavirus: Fed says US interest rates will likely remain close to zero until 2022
Unemployment expected to be at 9.3 per cent at the end of 2020
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Your support makes all the difference.The Federal Reserve chief has said US interest rates could likely stay close to zero until 2022 amid the coronavirus pandemic.
Interest rates were lowered to close to zero at the height of the pandemic in an effort to assist the economy, while unemployment rates soared and the stock market declined.
States across the US later started phases of reopening to boost the economy, but the Fed said it would still keep interest rates low during the recovery.
“We’re not even thinking about thinking about raising rates,” Fed chair Jerome H Powell said during a video press conference on Wednesday. “We are strongly committed to using our tools to do whatever we can for as long as it takes.”
“Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses,” the Fed added in a statement.
Economic predictions made by the Fed for this year offered a grim picture for the state of the US economy in the months and years to come.
Fed officials said in the report they expected unemployment to be at 9.3 per cent at the end of 2020. Unemployment was also expected to decline to 5.5 per cent by 2022, showing a longer journey to rebound the economy. Unemployment levels hit a record low of 3.5 per cent in February pre-coronavirus.
“Nearly 20 million jobs have been lost on net since February,” Mr Powell said. “The downturn has not fallen equally on all Americans.”
The GDP was also expected to take a 6.5 per cent hit compared to that of last year, the Fed said. In 2021, the GDP would grow by 5 per cent and then an additional 3.5 per cent in 2022, according to the report.
The decision to keep interest rates low came as the Fed worked to steer the US economy towards pre-pandemic levels. The department also vowed to increase its bond holdings.
White House Press Secretary Kayleigh McEnany was asked about the report from the Fed during her press briefing on Wednesday. She referenced the job report last week, which showed an increase of 2.5 million jobs in the month of May despite the pandemic. Ms McEnany suggested other parts of the Fed’s report were not reliable.
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