FOMC Drastically Cuts GDP Growth Estimate For 2022

The Federal Open Market Committee (FOMC) has revised its economic projections as new data has signaled the United States has entered a recession.

The FOMC is now projecting the unemployment rate will rise to 4.4% next year from the current 3.7%, marking a sharp increase from the previous projection made in June of a 3.9% unemployment rate next year.

Additionally, they estimate that GDP growth will slow to 0.2% for 2022, far below the previous estimate of 1.7% in June. The revision comes after the U.S. economy experienced two consecutive quarters of negative growth, the traditional definition of a recession, as the economy shrank at 1.6% in the first quarter and 0.6% in the second quarter.

The FOMC’s revisions come the as the central bank announced an interest rate hike of 0.75% to combat the inflation crisis, marking the third consecutive 0.75% increase.

In June, Federal Reserve Chair Jerome Powell warned that the process of bringing down inflation will “involve some pain” as it discourages growth in the already shrinking U.S. economy.

“We are committed to and will succeed in getting inflation down to two percent,” Powell said at the time. “The process is likely, highly likely to involve some pain, but the worst pain would be from failing to address this high inflation and allowing it to become persistent.”

On Wednesday, Powell reiterated the central bank’s commitment to bringing inflation down.

“The FOMC is strongly resolved to bring inflation down to two percent, and we will keep at it until the job is done,” Powell said.