Fed Holds Rate, Speaks About Medium Term Risks To Economic Outlook

The U.S. Federal Reserve today held its interest rate target between 0 percent and 0.25 percent.

The Fed said it would continue with its aggressive policy stance until it is comfortable that the economy is back on its feet.

The Federal Open Market Committee said in its post-meeting statement that the ongoing public health crisis “will weigh heavily on economic activity, employment, and inflation in the near term,” and pose considerable risks to the economic outlook over the medium term.

“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 statement reads.

Noting bleak conditions across multiple sectors of the economy, the Fed said, “The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” the post-meeting statement said.

“The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation,” the statement continued. “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 his post-meet press conference, Fed Chair Jerome Powell said “Medium term risks means over next year or so, primarily length of time to control virus. The risks also involve potential damage to economy, workers, if levels of unemployment remain high for an extended time.”

“Damage could also be done if small businesses are harmed by unnecessary insolvencies,” he said.

Powell also said that global dimension also poses risks that could weigh on US performance over time and said economic activity will start to pick up as reopening begins but will take some time to get back to more normal levels of unemployment.

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