Fed turns more optimistic about US recovery in 2021

Washington, Mar 17 (efe-epa).- The Federal Reserve has sharply raised its 2021 growth forecast for the United States economy, saying Wednesday it expects the nation’s gross domestic product will expand by 6.5 percent this year, up sharply from a December outlook for 4.2 percent growth.

After the latest two-day meeting of the Federal Open Market Committee (FOMC), participants submitted their projections for GDP growth, the unemployment rate and inflation for the current year, 2022, 2023 and over the long run.

They now see the US inflation rate coming in at 2.4 percent this year, up from 1.8 percent in December, and expect the unemployment rate at the end of December will stand at 4.5 percent, down from 5 percent in the earlier projection.

The FOMC, the central bank’s policy-making body, also said a decision was made at the meeting to keep the target range for the federal-funds rate, which banks charge each other for overnight lending, at 0 to 0.25 percent.

The FOMC said in a statement that it “expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

In their analysis of the current situation, the Fed governors said the path of the US economy will “depend significantly on the course of the virus, including progress on vaccinations.”

“The ongoing public health crisis continues to weigh on economic activity, employment and inflation, and poses considerable risks to the economic outlook,” the statement added.

Last week, US President Joe Biden signed into law a new $1.9 trillion Covid-19 relief package, the third since the onset of the coronavirus crisis.

The vaccine rollout in the US, meanwhile, has progressed significantly, with nearly 40 million people now fully inoculated, according to figures from the Centers for Disease Control and Prevention.

The Fed’s decision to keep interest rates at an extremely low level and the announcement of a sharply higher growth projection for this year were well-received by Wall Street.

The Dow Jones Industrial Average closed above 33,000 for the first time in history on Wednesday, finishing at 33,015.37, while the S&P 500 ended the day at a historic high of 3,974.12.

The tech-heavy Nasdaq Composite index rose 53.64 points, or 0.4 percent, to close at 13,525.20. EFE-EPA

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