Fed projections show it sees smaller economic hit in 2020 than previously expected

WASHINGTON (Reuters) - The Federal Reserve signaled on Wednesday it expects the U.S. economic recovery from the coronavirus crisis to accelerate with unemployment falling faster than the central bank expected in June.

In new economic projections released along with the U.S. central bank's latest policy statement, Fed policymakers at the median see economic growth dropping by 3.7% this year, an improvement from the 6.5% drop projected in June.

The Fed also expects that the unemployment rate, which has improved faster than officials foresaw in June, will continue to drop, with policymakers at the median expecting joblessness to hit 7.6% at the end of this year and fall to 4% in 2023.

Inflation is expected to remain below 2% until 2023. The Fed last month unveiled a new strategy that pledges to lift inflation above the 2% level to make up for years of undershooting that target.

The projections are the first that outline how Fed officials see the economy reacting under the new approach to policy, which puts more weight on allowing job growth and also envisions inflation running above target for a period of time.

They are also the first since the economy entered what officials hope will be a steady recovery from the recession triggered by the coronavirus epidemic.

(Reporting by Howard Schneider and Jonnelle Marte; Editing by Paul Simao and Andrea Ricci)

09/16/2020 18:17

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