US Federal Reserve Forecasts
Interest Rates near Zero Through 2022
10 June 2020
The US Federal Reserve left deposit interest
rate unchanged at 0.25% to zero and said it will maintain the same rate
through 2022.
The Fed’s Board renewed on Wednesday its
commitment to continue extending exceptional support to the economy as
policymakers anticipate a decline in the GDP by 6.5%, and an
unemployment rate at around 9.3% for this year.
The Board said in its most recent statement
“The prevailing health crisis will heavily weigh on the economic
activity, employment and inflation in the short term, and will shape
high risks on the economic projections in the medium term”. The initial
economic forecasts by policymakers, since last December, indicates that
the overnight interest rate will be close to zero till at least the end
of 2022.
The Fed expected inflation rate to remain below target at 2% till
2023, and the interest rate likely to stay unchanged for several coming
year.
The Central Bank revealed, among its projections, that the
unemployment rate will register 6.5% during 2021 and will reduce to 5.5%
in 2022. It also sees the inflation benchmark of the consumer personal
spending will slowdown in 2020 to 0.8%.
The Fed emphasized that it will maintain the interest rate near zero
until the economy recovers and starts growing. It has also expected to
keep its purchase volume of bonds unchanged at least for the time being.
The interest rate will reach 2.5% in the long term as expected by the
Fed.