Federal Reserve forecast brighter economy but challenging months ahead

Federal Reserve forecast brighter economy but challenging months ahead
The officials of trhe Federal Reserve said they expected growth of roughly 4.2% next year. Source: REUTERS
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Daily US Times: America’s central bank, Federal Reserve, said on Wednesday that the prospects for the US economy have brightened since September, despite a recent surge in coronavirus cases.

The officials of the Federal Reserve said they expected growth of roughly 4.2% next year, better than previously forecast.

It forecast a fall in the unemployment rate from 6.7% to 5%.

The update comes as US medical authorities begin to distribute Covid-19 vaccines.

The coming months would be “particularly challenging,” Federal Reserve Chair Jerome Powell warned, as the US battles a surge in coronavirus cases, while the unemployed and businesses face deepening hardship.

But he said he was hopeful that widespread distribution of the Covid-19 vaccines would enable a strong rebound in the second half of 2021.

He said: “You have to think that sometime in the middle of next year, you will see people comfortable going out and engaging in a broad range of activities.”

“The issue is more the next four or five months.”

Policymakers said they expected to continue several stimulus and including to keep interest rates near zero until they saw “substantial” progress toward recovery.

Hiring has slowed and retail sales have dropped in recent weeks, as consumers avoid restaurants and cut back spending.

Officials in some places such as California have re-imposed strict lockdowns to contain the virus, while others, such as New York City have warned of such steps.

Meanwhile, as government virus assistance expires, poverty rates have surged.

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