Fed: 9.3% unemployment by year’s end

Signaling confidence in the US economy, the Federal Reserve leaders predict the United States unemployment will fall to 9.3% by the end of this year and drop to 6.5% by the end of 2021.

In addition to releasing new forecasts Wednesday, the Fed also announced the benchmark interest rate would remain near zero and the central bank’s extensive bond buying programs will continue “at least at the current pace” for the foreseeable future.

Interest rates are likely to remain at near zero through at least 2022, the Fed indicated. Low interest rates make it cheaper for Americans to borrow money to buy a home or car and for businesses to take out loans. Mortgage rates fell to an all-time low at the end of May, causing a surge in home-buying, even during the pandemic.

“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Fed said in a statement Wednesday at the end of its regularly scheduled two-day policy meeting.

Americans will be happy to note that the Fed’s forecasts are notably rosier than many others, including the Congressional Budget

Office, which predicts unemployment will remain above 11% by the end of this year and fall to 9.3% only by the end of 2021.

“While the Fed was successful in helping the stock market recover from the Coronavirus-driven sell-off in March, the jury is out on how much the Fed is helping the economy recover,” Danielle DiMartino Booth, a former Fed adviser and chief executive of Quill Intelligence, said.

Some on Wall Street fear the Fed is fueling another market bubble by pumping so much money into the markets, even though stocks have rebounded to all-time highs.

“Markets are working just fine now. So why is the Fed still buying $20 billion of Treasurys a week?” Peter Boockvar, chief investment officer at Bleakley Advisory Group, said.

But Fed Chair Jerome Powell has made it clear he prefers to err on the side of caution to ensure the economy improves instead of sliding backward in the coming months.

“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time,” the Fed said Wednesday.

According to the nation’s Fed, many Americans are overreacting with nervous attitudes toward the stock market.There are signals of good times ahead and here they are.