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U.S. Economic Outlook for 2022 and Beyond

U.S. Economic Outlook for 2022 and Beyond

Inflation worries and rising interest rates weigh heavy

By Kimberly Amadeo   Updated February 19, 2022

Reviewed By Samantha Silberstein  Fact Checked By Lars Peterson

The U.S. economy exited 2021 in overdrive, but the growth combined with global supply chain constraints has pushed inflation higher than expected. Interest rate hikes were announced in March of 2022, which is predicted to cool the economy.1

The broadest economic indicator is GDP, which measures the nation's production of goods and services.

The U.S. Economy at the Start of 2022

The economy closed 2021 on a tear, with GDP growing 6.9% in the fourth quarter.2 Along with the growth came a spike in inflation: 7% year-over-year, much higher than the Federal Reserve's target of 2%.3 That means interest rate hikes were coming sooner rather than later. 

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The unemployment rate at the end of 2021 was just 3.9%, down from 6.4% at the start of the year. Unemployment hit its pandemic peak at 14.7% in April, 2020, when the economy shut down.

The Federal Reserve held the fed funds rate at near zero, and, with the help of its historic purchases of mortgage and Treasury securities, interest rates from home loans to car loans to personal loans were at or near historic lows, fueling economic growth. But at its December 2021 meeting, the Board announced it would reduce its purchases of Treasurys and mortgage-backed securities at accelerated rates (the "taper"), an indicator that higher interest rates were on the horizon.4

In the most recent Federal Open Market Committee (FOMC) meeting, on March 15-16, 2022, the Fed announced it would be raising interest rates for the first time since 2018, in order to combat rising inflation. The target range was increased by 0.25% (25 basis points), from 0% to 0.25% to 0.25% to 0.50%.1

Economic Growth

According to the December 2021 forecast released at the Federal Open Market Committee (FOMC) meeting on Dec. 15, U.S. GDP growth was expected to be 4% in 2022. It was estimated to then drop to a 2.2% growth rate in 2023 and slow its growth further to 2% in 2024.5 In their March 16, 2022 meeting, the Fed modified their former projections, predicting a lower 2.8% increase in GDP in 2022, followed by a 2.2% increase in 2023, and a 2.0% increase in 2024.6

Unemployment

 

To continue reading, please go to the original article here:

https://www.thebalance.com/us-economic-outlook-3305669

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