Fed cuts its economic growth forecast, raises inflation, unemployment estimates

Federal Reserve’s building

The Federal Reserve made a sharp cut to its forecast for economic growth in the US, but raised its estimates of unemployment and inflation rates.

In a report following its monetary policy decision, the Fed expected a gross domestic product (GDP) growth of 0.2% for this year, down from previous estimates of a 1.7% growth.

The Fed also downgraded its vision for US economic growth over the next two years to 1.2% and 1.7%, respectively, compared to earlier projections of 1.7% and 1.9% growth, respectively.

Meanwhile, the central bank raised its forecast for the 2022 unemployment rate in the US to 3.8%, against the previously-anticipated estimate of 3.7%. The unemployment rate, according to the Fed, is set to reach 4.4% over the next two years, versus past expectations of 3.9% and 4.1%, respectively.

The Fed forecasts the Personal Consumption Expenditure (PCE) Price Index to surge 5.4%, against the earlier-projected 5.2%. The central bank sees the index recording 2.8% next year, compared to its previous estimate of 2.6%, reaching 2.3% in 2024 versus past expectations of 2.2%.

for the third meeting in a row, the Fed decided this week on a 75-basis-point (bp) interest rate hike to reach a range of 3% and 3.25%, against a near-zero level in March.