US Fed improves economic, unemployment projections

By Ovunc Kutlu

ANKARA (AA) - The US Federal Reserve improved its projections Wednesday for economic growth, and the country’s unemployment and inflation rates.

The central bank now expects American economy to contract by 2.4% in 2020, an improvement from the previous estimate of a 3.7% contraction made in September. It also estimates economy to grow by 4.2% next year, up from the previous expectation of a 4% increase.

Due to economic slowdown, restrictions and quarantine measures caused by COVID-19, the world's largest economy shrank at an annual rate of 31.7% during the second quarter of this year -- its largest quarterly contraction on record, but bounced back by expanding 33.1% in the third quarter.

Around 22 million people in the US lost their jobs since March due to the pandemic, and roughly half of them could find employment since then.

The Fed now forecasts unemployment level to stand at 6.7% in 2020 and 5% in 2021, both down from the previous estimates of 7.6% and 5.5%, respectively.

The central bank's policy dictates to achieve maximum employment to revive American economy, and inflation will be a key figure it will follow in this respect.

The Fed expects inflation to average 1.2% this year, unchanged from previous projection, but forecasts it to average 1.8% next year, up from previous estimate of 1.7% made in September.

As for federal funds rate projections, the Fed's benchmark interest rate could remain unchanged through 2023 until the negative impact of COVID-19 on economy fully disappears.