• Stonepine Advisors

Fed expects interest rates to remain near zero through 2022, GDP to rebound by 5% next year

The Federal Reserve on Wednesday projected that interest rates will remain near zero through 2022 and pledged to continue supporting a U.S. economy devastated by the coronavirus pandemic and the related lockdowns.


The Federal Open Market Committee, in a unanimous statement, reiterated previous guidance that the benchmark federal fund rate will stay at a range between 0 percent and 0.25 percent until "it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."


Central bankers also released their first economic projections since December, forecasting that GDP will plunge by 6.5 percent this year as the coronavirus pandemic triggered an unprecedented shutdown of American life before rebounding by 5 percent in 2021.


They expect unemployment to fall to 9.3 percent at the end of 2020 and drop to 6.5 percent in 2021. Even in 2022, central bankers expected the jobless rate to remain elevated at 5.5 percent, well above the pre-crisis level of 3.5 percent, a half-century low.


The projections showed all policymakers expect to keep the benchmark federal funds rate at near-zero through the end of 2021. All but two officials saw rates staying there through 2022.


Fed officials skipped releasing their quarterly economic projections in March as they grappled with uncertainty over the virus outbreak.

The Fed's two-day meeting took place in the shadows of states rolling back stay-at-home mandates and allowing businesses to reopen, as well as a surprisingly good May jobs report.


Employers actually added 2.5 million jobs last month -- economists widely expected a loss somewhere around 9 million -- and the unemployment rate dropped to 13.3 percent.



© 2019 by Stonepine Advisors, LLC Member of SIPC and FINRA Check the background of Stonepine Advisors and its representatives on FINRA's BROKERCHECK.