US Economic Outlook – The new Federal Reserve policy framework reaffirms the Fed put

The August employment report shows the US labor market continuing to heal and advance on its recovery path. The pace of hiring is slowing though and the future trajectory of the recovery will depend heavily dependent on the pandemic and the related policy responses. The Federal Reserve revised its monetary policy framework and will now allow for greater levels of inflation in exchange for a stronger labor market. The monetary policy space has become thin though and the ball is in the court of fiscal policy to deliver on further needed stimulus.

Key takeaways

  • The new Federal Reserve policy framework reaffirms the Fed put.
  • We expect interest rates to be kept in check until at least 2024.
  • Further fiscal support is still pending, and will prove crucial to support the economy going forward.
  • The housing sector, vehicle sales and manufacturing production are showing signs of strong recovery.
  • In August, the US unemployment rate dropped from 10.2% to 8.4% due to the gradual resumption of economic activity and temporary federal hiring.
  • We maintain our real GDP growth forecast unchanged at -6.4% and 4.2% for 2020 and 2021 respectively.

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Economic Outlook US Economic Outlook –The new Federal Reserve policy framework reaffirms the Fed put

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SEE ALSO FORMER ECONOMIC OUTLOOKS