The title is paraphrasing Jerome Powell, the Chair of the Federal Reserve (Fed), who painted a sobering picture of the US’s economic prospects on Wednesday. According to the Fed’s latest economic forecast, real GDP could contract by as much as 6.5% this year followed by a recovery in 2021, when economic growth could reach 5%. In practice this means that the US’ GDP would not return to the pre-pandemic level before 2022 at the earliest – provided the Fed’s underlying assumptions are realistic. Mr Powell sent a very powerful message by stating that the FOMC unanimously sees the current Fed funds rate range of 0-0.25% stable by the end of 2021 (‘We’re not even thinking about thinking about raising rates’), whilst monthly asset purchases will continue as long as needed to ensure the orderly functioning of financial markets and to minimise the long-lasting negative impact of the coronavirus. In response to the Fed Chair’s remarks, President Trump’s tweeted that the Fed ‘is wrong so often.’ In the POTUS’ view the third quarter will be ‘very good’ and the fourth quarter will be ‘great.’ Although the President himself was openly displeased with the Fed, his administration’s economic advisor, Lawrence Kudlow, struck a more constructive tone, when he stated that it would be difficult for the Fed to offer a more accommodative policy stance.
This week, retail sales and industrial production data will be released in the US, which should provide some insights how economic activity in the world’s largest economy evolved in May. Elsewhere, the Bank of Japan and the Bank of England are scheduled to decide on interest rates and asset purchases, whilst the Fed Chair will deliver his semi-annual monetary policy report to Congress.
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