WASHINGTON — The U.S. economy shrank at a 4.8% annual rate during the second quarter of 2020 as the coronavirus pandemic shut down much of the country and began triggering a recession that will end the longest expansion on record.
The updated numbers come at the same time the Federal Open Market Committee concluded its meeting by opting to leave the Fed funds rate unchanged.
According to analysis released by the Commerce Department, U.S. gross domestic product posted a quarterly drop for the first time in six years.
The news is not expected to improve. Forecasts for the second quarter of this year are expected to more fully reflect the layoffs and business closures that have hit every state in the country.
The Congressional Budget Office has estimated that GDP will plunge this quarter at a 40% annual rate.
As CUToday.info reported here, a new CUNA Mutual forecast sees loans at credit unions growing at just 2% during 2020.
No Rate Change
Separately, the FOMC wrapped up its two-day meeting by leaving rates unchanged, not that it has much wiggle room.
“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses,” the Fed said. “Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.”
In its statement the Fed noted the ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.
“In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0% to .25%. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Fed said.