The coronavirus has demolished the forecasts that the Federal Reserve was handling for the electoral year in the US and the new forecasts reflect the magnitude of the impact on its accounts: GDP will fall by 6.5% and the unemployment rate will rise to 9 , 3% at the end of 2020. It is the first photograph that the Federal Open Market Committee (FOMC) has taken since the pandemic broke out, which has already claimed more than 114,000 deaths in the country.

The body chaired by Jerome Powell draws a deep drop in GDP for this year, far from the 2% growth that he had predicted in December. In fact, the first data that has already been published is quite in line with their projections. Figures show that the country experienced an annualized contraction of 5% in the first quarter, compared to the 2.1% growth observed during the previous quarter, according to the second estimate of the data published by the Government's Office of Economic Analysis.

However, the Fed expects the economy to recover vigorously in the next two years, with gains of 5% and 3.5% in 2021 and 2022 , respectively.

Working market

In the labor market, which was bordering on full employment until the health crisis erupted, a severe impact is also expected. The latest report showed that 2.5 million jobs were created in May and the unemployment rate fell to 13.3%, although it remains at levels similar to those of the Great Depression 90 years ago.

The Federal Reserve now believes that the unemployment rate will soar to 9.3% by the end of 2020, to drop to 6.5% and 5.5% in the next two years. In both cases, the forecasts are well above the 3.6% and 3.7% predicted by the previous calculations.

It maintains the types

To confront the situation, the institution led by Jerome Powell reiterated yesterday its "commitment" to use all the tools in its power to support the country's economy, achieve price stability and resume the path of full employment that had been before the pandemic.

In this context, the Fed did not announce any change in interest rates, which thus remain in a target range of between 0% and 0.25% , confirming Powell's own advance, that they would not fall into territory negative. In this line, the institution will continue buying assets for as long as it deems necessary to sustain the proper functioning of the market and to promote the transmission of its monetary policy.

Hours before the Federal Reserve's forecasts were known, US Treasury Secretary Steven Mnuchin wanted to launch a message of optimism and assured that the North American country is already facing the road to recovery. "The United States economy has started to rebound and our recovery is underway," Mnuchin told a Senate committee.

Pessimism in the bags

His words had little effect on the markets, which have spent the whole day pending what was happening in Washington but without losing sight of the news that came from Europe. News that has not been particularly positive. Industrial production in France sank 20.1% in April compared to March, leaving the cumulative drop in those two months at 33.1%, and retail sales in the EU registered an interannual decrease of 18% in that same month.

In addition, the OECD forecasts that the countries of the Eurozone will experience a cut in their Gross Domestic Product of 9.1% in 2020 if they manage to keep coronavirus infections under control, a contraction that would reach 11.5% in the most unfavorable scenario.

All this accumulation of bad omens has pushed back the main squares of the Old Continent . The Ibex 35 continues to move away from 7,700 points after losing 1.14%. The Ftse Mib in Milan also dropped 0.86%; the Cac 40 in Paris, 0.82%; the Frankfurt Dax, 0.70% and the London Ftse 100, 0.10%.

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