Federal Reserve officials projected Wednesday that the economy would grow 5 percent next year as it recovered from a projected 6.5 percent decline this year.
That would be the fastest annual growth in gross domestic product since 1984.
Fed chairman Jerome Powell emphasized, however, that the coronavirus pandemic has created a lot of uncertainty around economic developments.
“As we look ahead, we see the path for the economy is highly uncertain,” Powell said in a press conference following the two-day meeting of the Federal Open Market Committee, the central bank’s monetary policy panel.
The projections were released after the meeting concluded. They represent the views of individual committee members rather than an official view of the Fed.
The five percent projection is the median of the forecasts of members, which ranged from a decline of 1 percent to growth of 7 percent. The so-called ‘central tendency’ of the projections was for growth of 4.5 percent to 6.0 percent.
The median Fed projection also has the central bank holding its interest rate target at the current 0.25 to 0 at least through the end of 2022.
The unemployment rate is expected to fall from the recent record highs but remain stubbornly elevated through the end of the year, with the median projection of 9.3 percent at the end of 2020. The following year it is projected to fall to 6.5 percent and then to 5.5 percent in 2023. In the longer run, the Fed thinks unemployment will run around 4.1 percent.
Officials said they would keep up their recent pace of purchases of Treasury and mortgage securities, effectively ending plans to hold back the growth of the Fed’s balance sheet or reduce the size of Fed purchases.
“Over coming months, the Federal Reserve will increase its holdings” of Treasurys and mortgage bonds backed by government-sponsored entities “at least at the current pace to sustain smooth market functioning,” the Fed said in a policy statement issued at the conclusion of the meeting.
The Federal Open Market Committee left its target unchanged, as widely expected.
“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” the committee said in its statement.