All eyes were on the Federal Reserve this week as the board concluded their two-day meeting on Wednesday. After skipping economic projections in March, the Fed revealed their forecast for the economy and interest rates for the first time this year. According to the release, real gross domestic product (GDP) is expected to contract by 6.5% in 2020, followed by a strong rebound to 5% growth in 2021 and settling near 2% for the longer-term. Unemployment is expected to reach 9.3% this year, with that number declining to around 5.5% by 2022. The Fed cited improving financial conditions, while cautioning that the ongoing public health crisis is likely to “weigh heavily on economic activity, employment, and inflation in the near term.” There were no real surprises from a policy standpoint, and the expectation is for interest rates to remain at or near-zero for the foreseeable future. Stocks were relatively unchanged following the release but still slightly higher for the week. Interest rates moved lower, with the yield on the 10-year Treasury note falling from 0.90% to about 0.75% during the first half of the week. Going forward, investors will be looking to Thursday’s jobless claims release for a pulse on the recovery in the labor market as well as PPI and consumer sentiment data.
Source: Bloomberg, WSJ Market Data, GSAM