The Federal Reserve increased its economic expectations for the end of 2020 as well as 2021 according to the central bank’s Summary of Economic Projections. Now, real gross domestic product is expected to fall only 2.4% this year instead of the 3.7% the central bank predicted in September. The Federal Reserve also raised the 2021 real gross domestic product prediction to 4.2% up from the 4.0% it previously expected.
The Jerome Powell-led Fed estimates the unemployment rate to fall to 6.7% this year, further below the 7.6% previously predicted. The unemployment rate should fall to 5.0% in 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 of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”
The Fed kept its inflation estimates for 2020 unchanged at 1.2%. The FOMC now sees PCE inflation running to 1.8% next year, slightly above its previous estimate of 1.7%.
Core PCE inflation is expected to come in at 1.4% this year, down slightly from September’s projection of 1.4%. Next year, core PCE inflation is estimated to reach 1.8%, up from September’s forecast of 1.7%.
The Fed decided against making changes to interest rates in its December meeting. During an emergency meeting in March, interest rates were lowered to nearly zero due to the swiftly spreading Coronavirus.
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