US economy should fare a little better than expected, Fed says

The US economy is expected to fare a little better than expected in 2020, but the return to the flourishing situation at the start of the year is still a long way off and the crisis is hitting Americans very unevenly, the Central Bank warned on Wednesday. American. The recession will be less severe than expected and employment should recover more quickly. However, the pace of the recovery in the United States is “highly uncertain“, Admitted Fed Chairman Jerome Powell.

In addition, economic activity generally remains well below its pre-Covid-19 pandemic levels, he added. “I would say it will take time to (regain) expansionEconomic, he commented. The fall in the gross domestic product of the United States should be less brutal than expected in 2020, with a drop of 3.7%, instead of the 6.5% forecast in June, in the latest Fed forecast.

On the other hand, the rebound that will follow will also be less strong: 4% in 2021 and not 5%, and 3% in 2022 instead of 3.5%, then 2.5% in 2023. “The recovery of the economy will depend closely on the evolution of the virusThe Fed, which concluded its last monetary meeting before the November 3 presidential election, was the scene of a duel between Republican Donald Trump and Democrat Joe Biden in a statement. “The current health crisis will continue to weigh on economic activity, employment and inflation in the near term, and poses significant risks to the medium-term economic outlookAdded the US Central Bank.

A “long road»Towards full employment

The unemployment rate should also be lower than expected, at 7.6% in 2020, against 9.3% estimated in June. August figures were better than expected with an unemployment rate of 8.4%, reduced from the historic high of 14.7% in April. Put it remains “A long wayBefore returning to full employment, said Jerome Powell. February seems far away, with its unemployment rate at the lowest for 50 years, at 3.5%, which is however “not a magic number“, He said again.

Car, «nobody can tell if this number is the referenceFull employment, he added. Maximum employment is the goal on which the Federal Reserve has decided to concentrate its forces. Allowing all Americans to have a job is indeed the best way for the Fed to relaunch the machine in the long term and to reduce inequalities, which are very strong in the country and exacerbated by the crisis. “We see maximum employment as a broad and inclusive goalJerome Powell explained.

To achieve this, it recently made a major change in its monetary policy, temporarily allowing inflation above the 2% annual target, without raising interest rates, as it would have done so far. Thus, the Fed has revised its inflation target upwards, and now expects 1.2% in 2020, against 0.8% forecast, and expects to reach the 2% target in 2023.

On the interest rate side, on the other hand, no surprise: they remain unchanged, remaining at the lowest, in the range of 0 to 0.25% where it had lowered them urgently in March, in the face of the spread of Covid-19 in the United States and the implementation of containment measures. And they should remain so at least until 2023.

New government assistance

Jerome Powell also insisted on the importance of new government aid for households and businesses, a sine qua non for relaunching the economic machine. “Almost 11 million people are still unemployed because of the pandemic and many of these people worked in sectors that are struggling. These people need extra support», He underlined. The White House and elected Congressmen have been negotiating for a month and a half, to no avail. Discussions are stalling in particular on the amount of the envelope, the Republicans refusing to approve all of the funds requested by the Democrats.

However, the tone was much more optimistic on Wednesday and Donald Trump urged the elected officials of his camp in Congress to propose larger envelopes in order to reach an agreement. “I like the bigger amounts. I said it. Some Republicans disagreeHe said Wednesday at a press conference at the White House. “I wanna see people get money“, he added. The Democrats have assured them that they will not leave Congress without a deal.

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