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Second Quarter GDP Is Terrible; The Fed Stays Put

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The bad news is that GDP cratered in the second quarter of 2020, falling by a record 32.9% (on an annualized basis). The good news is . . . it wasn’t as bad as expected? Not much of an upside, but true: economists were expecting a 34.7% drop. Neither the Depression nor the Recession—nor, in fact, any economic slump in two centuries—caused such an extreme, sudden decline.

Meanwhile, the officers of the Federal Reserve met yesterday, and things pretty much went as expected, according to CNBC.

  • The Fed stuck with its low interest rates, holding its overnight lending rate around 0%.
  • It also said it would maintain bond purchases, as well as a range of lending and liquidity programs that have been part of its response to COVID-19.
  • Their statement said the rate would stay where it is until officials are “confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The bottom line: While the state of growth has improved over the worst months of the COVID-19 pandemic—when businesses were shut down across the country—we’re still well below the level of economic activity and employment at the beginning of the year.

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