Fed forecasts the US economy will grow at the highest rate in 40 years

The US Federal Reserve (Fed) pledges to continue to support the economy and is forecasted to grow by 6.5%, the highest level in nearly 40 years.

Mr. Jerome Powell, Chairman of the US Federal Reserve (Fed). Photo: AFP

“Good data is ahead of us,” Fed Chairman Jerome Powell confidently confirmed after the two-day policy meeting ended on March 17.

Fed officials expect US GDP growth to spike to 6.5% in 2021 thanks to a large-scale federal fiscal stimulus package ($ 1,900 billion – BTV) and optimistic outlook from success. of the Covid-19 vaccine.

“The checks (fiscal stimulus) are on the way … The number of Covid-19 infections is falling,” he noted, emphasizing that Covid-19 vaccination in the US is progressing rapidly. fast. These efforts lead a group of top US economic officials to hope that its growth in 2021 will be on par with China, not to mention that it will quickly outpace those of Europe and Japan.

Fed officials expect US economic growth to maintain its growth trend for at least the next 2 years, at 3.3% in 2022 and 2.2% in 2023, relative to potential growth. long term is estimated at only 1.8%.

While inflation is forecast to increase to 2.4% in 2021, higher than the 2% target set by the Fed. The Fed Chairman explained that the 2.4% increase is seen as a temporary rally and will not affect the Fed’s commitment to keep the base rate close to 0% in an attempt to secure economic wounds. due to the Covid-19 pandemic will be completely healed.

There has been a change in the views of 18 Fed policymakers. Of which, 4 members expect interest rates to be pushed up by 2022 while the other 7 members want to raise interest rates by 2023. But considering the expected increase in inflation in 2021 plus no major response. Which book, can see the Fed has kept its new policy framework and is committed not to overreact when signs price increase first appeared.

Fed officials now expect inflation to continue to be contained even as unemployment drops. This is considered a “gamble” calculated according to the new Fed approach when they emphasize on both job growth and inflation risk reduction.

Mr Powell noted that the majority of members of the Fed’s Federal Open Market Committee expect not to raise interest rates until at least 2024. The Fed chairman also confirmed that it is too early to talk about narrowing the buy-in program. bonds and mortgage-backed securities worth $ 120 billion / month to boost the US economy.

In its policy statement, the US Federal Open Market Commission agreed to keep the prime rate in the 0-0.25% range. “We are committed to providing the support needed to get the economy back to maximum employment as quickly as possible,” said Powell at a press conference after the Fed released its new economic forecasts. and the latest policy.

“We’re really not done yet. We’re clearly on a good path. But we’re not done yet, and I hate to see our distraction … There are about 10 million people in need.” must go back to work, “said the Fed Chairman.

The US stock market and treasury bond last night breathed a sigh of relief after the Fed’s policy decision. US stocks last night closed in the green with the S&P 500 index and the Dow Jones industrial average both peaking, and the latter part of the yield curve on US silver bonds still goes up.

Anthony Denier, CEO of Webull exchange said: “There is a lot of concern about the recent rise in US Treasury yields, but the Fed’s very dovish policy response to the economic outlook. strong is a sigh of relief.

And Seema Shah, chief expert at investment consulting firm Principal Global Investors said, if looking at the disruption and economic volatility in 2020, the recent move of the Fed is amazing.