U.S. economy seen shrinking by 6.5% this year
The U.S. Federal Reserve painted a fairly dull outlook for the economy and labor market at the conclusion of its two-day monetary policy meeting on Wednesday.
However, the central bank committed to keeping its benchmark interest rate unchanged at near zero all the way through 2022 and continue its extensive bond-buying program.
According to its projection, the U.S. economy will contract by 6.5% this year, followed by a 5% expansion in 2021. The bank projected that the jobless rate could drop to 9.3% in the fourth quarter of 2020, before hitting 6.5% by the end of 2021.
In a statement released after the meeting, the Fed said the “ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
“Unemployment remains historically high,” Fed boss Jerome Powell said in a virtual news conference. “My assumption is there will be a significant chunk … well into the millions of people, who don’t get to go back to their old job … and there may not be a job in that industry for them for some time.”
Stocks to open sharply lower on Fed’s gloomy outlook and fears of a second wave of COVID-19 cases
U.S. stock futures pointed to a sharply lower open for Wall Street on Thursday after the Fed’s subdued outlook for the economy and concerns of a second wave of COVID-19 infections spooked traders.
On Wednesday, Texas reported 2,504 new virus infections, the highest one-day total since the pandemic erupted. Florida has also reported 8,553 new infections so far this week, the most of any seven-day period.
By 5:30 a.m. ET, futures tied to the blue-chip Dow were trading 497 points, or 1.84% lower to 26,464. S&P 500 futures were down 45.38 points, or 1.42% to 3,140.62 while the tech-heavy Nasdaq 100 futures shed 110.25 points, or 1.09% to 9,977.
U.S. West Texas Intermediate (WTI) crude futures were down $1.40, or 3.54% to $38.20 a barrel. International Brent crude futures were at $40.37 a barrel, down $1.36, or 3.26%.
Weekly jobless claims eyed
Today’s focus will be the U.S. weekly initial jobless claims report, which is expected to show another 1.55 million Americans claiming unemployment insurance for the week ended June 6 because of the COVID-19 pandemic.
The Labor Department will release the figures at 8:30 a.m. ET. Data released last week showed that 1.9 million Americans filed claims, a sign that the worst is over for the pandemic-induced jobs crisis.
