Fed holds rates near zero, says economy has gotten better even with pandemic worries
The Federal Reserve on Wednesday held its benchmark interest rate near zero and said the economy continues to progress despite concerns over the pandemic spread.
As expected, the Federal Open Market Committee concluded its two-day meeting by keeping interest rates in a target range between zero and 0.25%.
Along with that, the committee said in a unanimously approved statement that the economy continues to “strengthen.”
Despite the optimism about the economy, Chairman Jerome Powell said the Fed is nowhere near considering a rate hike.
“Our approach here has been to be as transparent as we can. We have not reached substantial further progress yet,” he said. “We see ourselves having some ground to cover to get there.”
“Substantial further progress” on inflation and employment is the benchmark the Fed has set before it will tighten policy, which would mean slowing and ultimately stopping monthly bond purchases and ultimately raising interest rates.. The statement noted only that “progress” has been made, and the FOMC will continue to watch conditions to see how close they get to the Fed’s goals.
The notation that “progress” has been made towards the Fed’s goals on employment and inflation was nevertheless seen as a nod that changes to policy, particularly regarding the monthly bond purchases, could be on the way.
Powell says Fed likely to taper asset purchases 'at the same time'
The Federal Reserve will likely reduce its monthly purchases of mortgage-backed securities and Treasuries simultaneously when it is time to pare back its support for the U.S. economy, though policymakers are debating whether to wind down the buying of MBS at a faster pace, Fed Chair Jerome Powell said on Wednesday.
Some U.S. central bank policymakers have said they want to end their monthly $40 billion of MBS purchases faster than the $80 billion in Treasuries because of the hot U.S. housing market.
Reference: CNBC,Reuters