The Federal Reserve improved projections Wednesday for a slumping US economy and the country’s unemployment rate.

The central bank now expects the economy to contract between 5.5% or grow 1% in 2020, an improvement from previous estimates of a 10% to 4.2% contraction made in June.

The world’s largest economy shrank at an annual rate of 31.7% during the second quarter, the largest quarterly contraction on record.

Meanwhile, the unemployment rate stood at 8.4% in August and the Fed also made revisions to those projections.

It now forecasts the rate in the range of 6.5% to 8% for 2020, revised down from 7% to 14%.

While the Fed’s new policy is to achieve maximum employment to revive the economy, it will allow the inflation rate to climb above its 2% target and stay there for some time.

The target, however, is expected to be met at its earliest in 2021 when the Fed estimates inflation to be between 1.3% to 2.4%.

As for federal funds rate projections, the Fed’s benchmark interest rate could remain unchanged through 2023, according to its “dot plot” that shows projections of the Federal Open Market Committee’s 12 members. 

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