Fed anticipates slow rebound for U.S. economy from virus
WASHINGTON
Federal Reserve leaders predict a slow recovery for the U.S. economy, with unemployment falling to 9.3 per cent by the end of this year and to 6.5 per cent by the end of 2021, after millions of Americans lost their jobs in the recession caused by the coronavirus outbreak.
Fed chairman Jerome Powell stressed Wednesday that the economy probably will need aid from the central bank and Congress for a long time. He repeatedly highlighted his concern that millions of Americans will become permanently unemployed from this crisis as the companies they used to work for go out of business or their old jobs are eliminated.
“Unemployment remains historically high,” he said during a news conference Wednesday. “The downturn has not fallen equally on all Americans. The rise in joblessness has been especially severe for lower-wage workers, women, African-americans and Hispanics.”
The Fed also announced that it will continue to support the economy with historically low interest rates. The benchmark interest rate will remain near zero, probably through at least 2022, and the central bank’s extensive bond-buying programs will continue “at least at the current pace” for the foreseeable future.
Stocks initially rallied on the Fed news, but the gains evaporated as Powell said he was in “risk management” mode, presenting a cautious view of the main hurdles the economy still faces.
One of the biggest concerns at the Fed and beyond is the pandemic and subsequent recovery probably will deepen inequality in the United States, possibly for years to come. The Fed has limited tools to use in emergency situations, and those tools tend to help buoy Wall Street more than Main Street.
Powell stressed the limits of the Fed’s ability to help the economy, suggesting that Congress needs to do more to aid workers who can’t get their jobs back this summer and small business owners who don’t make it through this pandemic.