On Wednesday the Central Bank announced its forecast for a slow economic recovery from the COVID-19 recession. The near-zero interest rates remain unchanged.
When Fed officials announced their first economic projections earlier this year, the unemployment rate was expected at 9.3% at the end of 2020, and was said to stay elevated for the coming years.
“Nearly 20 million jobs have been lost on net since February,” the Fed chair, Jerome H. Powell, said at a news conference following the release of the forecast. “The downturn has not fallen equally on all Americans.”
The latest forecasts predict a much slower return to economic strength than the Trump administration initially expected. The Fed skipped its quarterly economic summary in March as business activity came to a near deadlock due to the coronavirus pandemic.
Steven Friedman, senior macroeconomist at MacKay Shields shared his view: “The projections highlight what a long slog the recovery will be.”
The Fed also added that it would continue acquiring government-backed debt “at least at the current pace” to support smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate.”
Mr. Powell made a promising statement that the Fed would do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.
In response to the Fed’s economic outlook, stock futures fell as investors digested the latest coronavirus developments.
Futures on the Dow Jones Industrial Average fell 450 points. S&P 500 and the Nasdaq 100 futures also pointed to a losing start at the Thursday open. Meanwhile, the Nasdaq Composite climbed 0.7% to a record closing high of 10,020.35 .
“The Fed understands we are just in the beginning phases of the economic recovery and making rash changes to policy or forward guidance is premature at this time,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.