WASHINGTON • The United States Federal Reserve on Wednesday repeated its promise of continued extraordinary support for the economy as policymakers projected a 6.5 per cent decline in gross domestic product this year and a 9.3 per cent unemployment rate at the year end.
"The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term and poses considerable risks to the economic outlook over the medium term," the Fed said in its latest policy statement.
The projections see the overnight interest rate remaining near zero through at least 2022.
Though much of the statement repeated language from its April meeting, the central bank did promise to maintain bond purchases at the current pace of around US$80 billion (S$111 billion) per month in Treasuries and US$40 billion per month in agency and mortgage-backed securities - a sign it is beginning to shape its long-run strategy for the economic recovery.
That is expected to begin in earnest next year with growth forecast at 5 per cent.
The pledge to keep monetary policy loose until the US economy is back on track repeats a promise made early in the central bank's response to the pandemic. That response included cutting its key overnight interest rate to near zero in March and making trillions of dollars in credit available to banks, financial firms and companies.
But the projections are the first issued since December, and offer policymakers' views of how fast employment and economic growth might recover, and an initial steer on how long the federal funds rate will be pinned down.
Separate data released yesterday by the US Labour Department showed that initial jobless claims for regular state programmes totalled 1.54 million in the week ended June 6, down from 1.9 million in the prior week. Applications for unemployment insurance have fallen consistently each week since peaking at the end of March, but the volume of weekly filings is still more than double the worst week during the Great Recession.
REUTERS, BLOOMBERG
