The US Federal Reserve cuts growth forecast for 2021 again

Created: 12/15/2021, 8:49 PM

The US Federal Reserve in Washington.

© Liu Jie / XinHua / dpa

In June the Fed had expected growth of 7 percent.

The US Federal Reserve has long since moved away from this forecast.

Washington - The US Federal Reserve (Fed) has lowered its forecast for economic growth this year again.

In September, the central bank had assumed an increase of 5.9 percent, now it expects growth of 5.5 percent, as the forecasts published by the Fed on Wednesday showed.

In June, the central bank had expected growth of 7 percent for the world's largest economy.

The central bank now expects growth of 4 percent for 2022.

The central bank also revised its inflation expectations upwards again. For 2022, the Fed is now expecting an inflation rate for consumers of 5.3 percent. In September it had assumed 4.2 percent. For 2022, the Fed expects an inflation rate of 2.6 percent, 0.4 percentage points more than in the September forecast. In the medium term, the central bank is aiming for an average inflation rate of around 2 percent.

The central bankers lowered their forecast for the unemployment rate at the end of the year from 4.8 percent to 4.3 percent, which reflects the ongoing recovery in the labor market.

Many companies already complain of a shortage of workers.

At the height of the Corona crisis, the rate had reached almost 15 percent.

Before the pandemic, the unemployment rate was 3.5 percent, the lowest level in decades.

The US Federal Reserve is signaling a stronger tightening of monetary policy for the coming year than recently expected.

As the Fed's forecasts emerged, the key interest rate, which is currently in the extremely low range of 0.0 to 0.25 percent, could rise to 0.9 percent in 2022.

In the previous forecast from September, the Fed was still assuming a level of 0.3 percent.

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An interest rate of 1.6 percent is now targeted for 2023.

That would be 0.6 percentage points more than in the last forecast.

The Fed is under pressure to tighten the reins of monetary policy because of persistently high inflation.

The Fed's interest rate forecasts represent the average rate hikes expected by the members of the Central Bank Council.

They are not binding on the central bankers.

You can always adjust monetary policy in view of the development of the economy and the labor market.

dpa