The American Central Bank, the Fed will continue its zero interest rate policy due to the Corona-crisis is still expected to continue. According to new forecasts from the Central Bank released after its rate meeting on Wednesday. Accordingly, the majority of the monetary policy decision-makers at the Fed believe that by the end of 2022, the current level of interest rates of virtually zero percent will be retained.
The Corona-crisis will weigh on the economy, the labour market and Inflation, said the Fed. There are significant economic risks exist. For this year, the Central Bank expects the economy will shrink by 6.5 per cent, followed by growth of 5.0 percent in the coming year. The unemployment rate is expected to amount this year to 9.3 percent, and in 2021 to 6.5 percent decline. The Inflation is forecasted to be up to 2022 under the objective of the Fed of 2 percent.
The Fed has lowered the key interest rate since the Spread of the Corona-crisis on the United States in March in two large steps to almost zero percent. At the beginning of March the Prime rate was between 1.50 and 1.75 per cent.
difference to the “Great Depression”
The previous reaction of the Fed to the Corona-crisis is unprecedented, and makes even her Intervention in the financial crisis in the shadows. In addition to interest rate cuts, purchases of securities on a large scale were made and a number of credit programmes to support the economy. Economists had expected the decisions of the Fed, most of the time.
Fed Chairman Jerome Powell place, due to the severe economic crisis in clear words. Asked about the sharp rise in unemployment in the United States, he said that a significant part of the job losses could be permanent. Although he could not draw on reliable estimates. The unemployment number could go well into the millions, he said.
all black Powell did not want to paint, however. On the question of whether the world is facing a similarly severe economic crisis, such as during the “Great Depression” about 90 years ago, replied Powell: “I believe that the Great Depression is a good example of what is happening.” He called a number of differences, which is why the Corona pandemic, probably the most serious crisis in the recent economic scabbard history. Among other things, Powell pointed to the quick and forceful reaction by the American government, as well as the generally good condition of the American economy and the financial system.
German Economists disappointed
In addition, the Central Bank specified the extent of its purchases of securities to stimulate the economy. The purchases would be conducted “at least” in the current pace, the Federal Reserve. The Fed of New York, for the settlement of the purchases, added to invest about 80 billion dollars per month in American government bonds. Around 40 billion dollars per month will flow into mortgage-backed securities (MBS).
