U.S. economy continues to strengthen but at a slower rate

According to the U.S. Federal Reserve, the U.S. economy continues to strengthen, however, at a slower rate because of the delta strain of coronavirus.

The central bank announced the jobs market was improving, and high rates of inflation remained short-lived.

The U.S. Federal Reserve reported it may begin reducing its emergency support for the economy soon, but it didn’t provide any details.

Moreover, half of its policymakers also predicted interest rates will need to increase next year from current rock-bottom levels.

The data show that the U.S. economy has recovered strongly this year from its pandemic lows. However, it’s essential to mention that there are concerns Delta will derail the recovery.

The U.S. added fewer jobs than anticipated in August as growing infections hit spending on travel, tourism, and hospitality.

Inflation, which measures the growth in the cost of living over time, is at 5.3% – the highest level in about 13 years. Remarkably, it comes amid rising consumer demand, increasing energy prices, and supply chain-related shortages.

Federal Open Market Committee says overall indicators of economic activity have continued to strengthen

However, the Federal Open Market Committee, which sets U.S. monetary policy, announced overall indicators of economic activity have continued to strengthen.

The FOMC announced that the sectors most negatively affected by the pandemic have improved in recent months, but the surge in coronavirus infections has slowed their recovery. 

It added that inflation is elevated, largely reflecting transitory factors. Additionally, overall financial conditions are accommodative, in part reflecting policy measures in order to help the economy and the flow of credit to U.S. households and businesses.

According to the FOMC, the path of the economy still depended “on the course of the virus.” Furthermore, it expects to keep monetary policy loose until more progress is made on stabilizing unemployment – which stands at 5.2% – and consumer prices.

But, it stated if progress continues broadly as anticipated, it may soon pare back its $120 billion bond-buying program, which has supported keep borrowing rates low.

The Federal Reserve has two goals. It intends to keep U.S. inflation at about 2% and to achieve maximum employment.

During the COVID-19 pandemic, it has helped the economy by cutting interest rates to historic lows and pumping billions of dollars into the financial system by purchasing government and corporate bonds.

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