JAKARTA (TheInsiderStories) – The Federal Reserves (Fed) chairman, Jerome Powell, give a signal that the Fed Fund Rate (FFR) will stay near zero percent until 2023. While, the Federal Open Meeting Committee (FOMC) decided to kept the target range for the FFR at 0 to 0.25 percent for this month.
In the virtual conference on Wednesday (09/16), he also warned that a lack of further fiscal support from Congress and President Donald Trump could “scar and damage” a United States (US) economy restrained by the pandemic. But he optimism that Democrats and Republicans would find a path forward on another COVID-19 relief bill despite a weeks-long stalemate between both negotiators.
Powell also mentioned, the differences between the current economic downturn and past periods of contraction including the financial crisis. He asserted, “This really was a natural disaster that hit an economy that was doing well with a banking system that was well capitalized and highly liquid, and understood its risks pretty well.”
In the official statements, the policymakers expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the committee’ assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. The governors also stated on an uncertain economic rebound without further stimulus.
According to Powell, the global economic rebound will not continue without further fiscal stimulus. The Fed, he adds, is committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum employment and price stability goals.
The COVID-19, said the statement, is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation.
Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses. The path of the economy will depend significantly on the course of the virus.
The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. It said, the committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
With inflation running persistently below this longer-run goal, the policymakers aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.
In addition, they expects the current level of FFR will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the the assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
The policymakers rated, over coming months the Fed will increase its holdings of treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.
In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook. The governors would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’ goals.
The policymakers’ assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments, concluded by the FOMC.
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