FOMC meeting made the markets drop

By: Miguel A. Rodriguez

09:45, 14 September 2020

The latest FOMC’s predictions aren’t too rosy for the American economy.

The two-day meeting held by the Federal Reserve painted a clear picture of the future of the American economy.  

The Federal Open Market Committee (FOMC) has decided to exclude the idea of a negative interest rate and keep it between 0% and 0.25%. Fed's interest rate forecast for this year and the next two were set at 0.1% after the projections ranged from 1.6% to 2.1%.

For this year, the GDP is to contract by 6.5%, revoking the 2% growth estimated for the year. The Fed raised the economic growth estimates for next year to 5% from 1.9%. For 2022 it expects an increase of 3.5% from 1.8% original. In terms of inflation, it will drop to 0.8%. 

The unemployment rate it's expected to reach 9.3% from the initial 3.5% in 2020. By 2022, it will fall to 5.5%.

The combined Fed financial measures to cushion the pandemic's impact on the market exceeded $7 trillion. The central bank will continue its bond-buying process at the same rate as now to assure a cash flow to households and businesses.

The measures will be in force until the economy is on the right track toward achieving maximum employment and price stability.

After the meeting, international markets dropped. At that time, USA500 lost 0.4%, ASX dropped by 2.1%. HongKong45 and Europe50 lost 0.4%, and 0.8%, respectively. 

The American 10-year Treasuries ended the day by shedding 0.72%.


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