Market and product
US Fed keeps interest rates near zero, ups forecasts of GDP growth to 6.5% in ’21
The US Federal Reserve voted on Wednesday to keep interest rates unchanged at 0-0.25% and raised its projections for GDP growth in 2021 to 6.5% from 4.2% in its December 2020 projections.
The central bank also increased its inflation projection for 2021 to 2.4% from 1.8% in December while noting that the path of the economy will continue to be impacted by the coronavirus, including progress on vaccinations.
The Fed said that because the pace of the recovery has moderated in recent months, “indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak”.
The Federal Reserve has a dual mandate to keep inflation under control and to encourage maximum employment.
The Fed said inflation has been running persistently below the 2% target, so they will aim to “achieve inflation moderately above 2% for some time” in order to achieve a 2% average over time.
Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses, the central bank said.
Demand for plastics and chemicals tends to rise and fall at multiples of GDP. As a result, demand usually falls during recessions and rises during expansions.
Interest rates and other monetary policies can affect GDP by increasing or restricting the availability of credit to companies and households. -ICIS -
