US central bank keeps rates zero, sees economy rebound in 2021

Washington | The US Central Bank has warned that it will leave interest rates at the lowest for a while even if it expects the first economy to rebound next year.

In 2020, the issuing agency anticipates a 6.5% drop in the gross domestic product of the United States, before a strong rebound of 5% in 2021 and more modest growth (3.5%), the year next.

The world’s largest economy fell 4.8% in the first quarter, after more than ten years of growth. GDP could dip further by 20-30% in the second quarter.

As for unemployment, which had climbed to 14.7% with the implementation of containment measures, but fell in May to everyone’s surprise, the Fed sees it stand at 9.3% for 2020 as a whole , then fall to 6.5% in 2021 and 5.5% in 2022.

Before the pandemic, it had reached its lowest level in 50 years, 3.5%.

These forecasts are the first to be released by the Fed since the start of the pandemic that plunged the country into one of its worst crises.

“The current health crisis will weigh heavily on economic activity, employment and inflation in the short term, and poses considerable risks to the economic outlook in the medium term,” said the Fed in a statement released at the after two days of monetary meeting.

In its previous projections, released in December, the powerful financial institution had forecast growth of 2% this year and 1.9% next year.

Zero rate

The Central Bank kept rates in the range of 0 to 0.25%, the level it lowered them in March when the country began to contain pandemic containment measures, putting a stop brutal to economic activity.

It has promised, as it has done since the start of this crisis, to do everything it can to support the world’s largest economy.

The American Central Bank has put in place since the start of the crisis, which has killed more than 112,000 people in the country, a whole range of measures, some of which are unprecedented, to allow the economy to resist.

“The coronavirus epidemic is causing enormous human and economic hardship in the United States and around the world. The virus and the measures taken to protect public health have led to a sharp drop in economic activity and a sharp increase in job destruction, “the Fed said in its press release.

Before the pandemic, the world’s largest economy, which had benefited from fiscal stimulus in 2018, had started to slow down, but continued to grow at a rapid pace compared to other advanced countries.

The United States entered a recession in February after 128 months of expansion, according to the authoritative National Bureau of Economic Research, and even revised its definition due to the brutality of the shock caused by the pandemic of coronavirus.

Treasury Secretary Steven Mnuchin said Wednesday he expects the economy to rebound strongly in the second half.

The US economy has been showing signs of a thrill for several weeks, as businesses and restaurants across the country are gradually reopening.

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