US Fed keeps interest rate unchanged, not to raise until 2022

The US Federal Reserve kept interest rates unchanged near zero and indicated that’s where they will stay until 2022.

In a statement, the central bank said the economy will shrink 6.5% in 2020, while raising its forecast for the average unemployment rate to 9.3%. However, 2021 is expected to show a 5% gain followed by 3.5% in 2022, both well above the economy’s longer-term trend.

The Fed issued its statement of updated economic outlook for the first time since the COVID-19 pandemic began in March.

The Fed expects the inflation rate to remain below its target (2%) until 2023, and stated that the interest rate will likely remain unchanged for several years to come.

Meanwhile, it sent a letter to the financial markets saying it would do everything in its power, and would take all necessary steps to support the American economy.

The central bank added that unemployment rate will touch 6.5% in 2021, and subsequently will decrease to 5.5% in 2022, noting that the inflation index in personal consumer spending will slow down to 0.8% in 2020.

The Fed also stressed that interest rates will be kept near zero until the US economy returns to the path of recovery and growth, as it expected the size of bond purchases to not change at least for the time being.