Federal Reserve Expects US Economy to Grow Faster than Forecast

With the rate at which vaccinations are being administered, and with the flow of relief funds into the American economy, the Federal Reserve is expecting a faster and more significant rate of economic growth than originally forecast. 

The official prediction in December of last year was 4.2%. However, the Reserve has revisited that prediction, forecasting an average growth of 6.5% this year, instead. 

The revised prediction isn’t exclusively the result of vaccinations and relief funds, though. The American job market is also experiencing a stronger recovery than initially predicted, as are technology stocks that had, up to this point, been struggling to hold value. 

Despite the improved prediction from the Fed, there has, as of now, not been a move to increase interest rates. Members expect to continue borrowing for little to no cost until 2023, according to a note released after the Fed’s regular meeting. 

The banking conglomerate’s current policies surround rejuvenating economic activity. Federal Reserve Chair Jerome Powell explained that the banks wanted to see more concrete evidence of economic recovery before making any changes to those policies. 

Hospitality and Leisure Still Struggle

Despite the optimistic outlook of many economic officials, the sectors most affected by the global pandemic, including Hospitality and Leisure, are still struggling to recover from the damage. 

Despite the weakness of these sectors, there is still a general feeling of positivity surrounding the overall economic recovery of the country. 

Inflation Prediction Sees Wall Street Jump

A compilation of independent economic forecasts made by bank board members includes projections that speculate inflation could increase by 2.4% this year. This is far above the goal of 2%, and as a result, various share prices on Wall Street jumped as people began moving their funds into something less likely to be affected by this depreciation. 

The US Fairs Better Than Europe

Current economic recovery, as well as forecasts in the US, are far more optimistic than that of Europe. Many European countries are still crippled by the effects of the EU’s virus policies, and some member states are still in lockdown 12 months after the outbreak began. 

Despite this, Mr. Powell claimed that this lack of recovery from other economic zones would not hurt the US. 

He claims that the strength of the US economy historically helps to strengthen other economies around the globe. 

While he expressed his support for European recovery and wished that the vaccination rollout was progressing more smoothly, he claimed that his focus was purely on the future of the American economy. 

Markets Grow as Inflation Prediction Sows Fear

In response to this expected 2.4% inflation rate this year, many different markets have grown as investors move their value out of the dollar and into more tangible assets. 

While Wall Street has benefited from this shift, there is perhaps no market more surprisingly strong than crypto. 

Bitcoin has managed to retain its all-time high value of around $50,000 despite predictions of a correction down to $30,000. It’s likely that the news surrounding the future of the US economy had a role to play in that retention of value. 

Investors seem to view Bitcoin as a stable resource in what is otherwise an unpredictable time for American economics, so it’s likely we’re going to see Bitcoin continue to dominate while the dollar struggled.