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US economy down by only 3.7% but it may no longer be the first economic power

The American Fed revised its 2020 US GDP estimates upwards this evening.While in June, due to Covid, the central bank expected a 6.5% collapse, now that figure has been corrected to -3.7%. Always a sharp decline, in short, but much less marked than expected at the beginning of the summer. The fed also predicts an unemployment rate of 7.6% and inflation of 1.2%. “The recovery has been faster than expected,” said President Jerome Powell. For 2021, the rebound in GDP is estimated between 3.6 and 4.7%, less than the 4.5-6.0% expected in June; Instead, we will have to wait until 2023 to see unemployment return to 4%. The Central Bank also announced that it will leave rates close to zero until maximum employment is reached. The economic recovery – underline the experts “will depend significantly on the course of the virus”.

Central banks are facing situations unimagined until a few months ago, forcing them to reduce interest rates to zero, for those like the Fed that could, or to institute new bond repurchase programs such as the ECB, or to do both. things together (always the Fed). Yesterday Jerome Powell announced that dollar interest rates will remain at zero until 2023 and at the same time predicted that inflation will not reach 2% before 2023.
The US economy will take a few years to recover, but it is clear to many that there are many nations that are in the same condition or even worse.
Although economic activity and employment have risen in recent months (in the US), they remain below the levels of the beginning of the year. Demand is weak and the price of oil is significantly low, the note published by the FOMC reads.

A situation that obviously depresses consumer prices and inflation, the “real” engine of economic development (read with some irony), is depressed.
Recovery depends on the spread of the pandemic writes the FOMC, but in reality it depends on the vaccine. As soon as we have a truly effective one, the confidence indices, the morale of investors and of all humanity will find again optimism.
The Fed’s goal is to slightly exceed the 2% inflation rate to keep it at that level “for a while” in order to meet expectations of inflation remaining at 2% for a long time.

It will be the last year of the presidency of the president that the Americans will elect this year, but it will also be a year in which the effects of the economic and monetary policies implemented will have to be seen.
According to analysts who gathered at the Singapore Summit these days, the United States will remain an economic superpower and in the field of technology and finance, but it may no longer be the first world power.

By Domenico Greco

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