JAKARTA (TheInsiderStories) – The Federal Reserve (Fed) chairman, Jerome Powell, rated the path of the United States (US) economy is going to “depend significantly on the course of the virus,” and the sharp acceleration since mid-June is restraining the ability of the economy to recover in the second quarter. The measures taken to keep it in check are critical, he adds.
“On balance, it looks like the data are pointing to a slowing in the pace of the recovery. This pandemic and its fallout really represents the biggest shock to the US economy in living memory,” said the chairman in a press conference on Wednesday (07/29).
At the meeting, Powel asserted, the Fed 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 virus outbreak, said Federal Open Meeting Committee in a statement, is causing tremendous human and economic hardship across the country and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.
The the policymaker noted, the weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall, they said, 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 ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent,” said the board of governors.
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 policymakers also will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy.
In determining the timing and size of future adjustments to the stance of monetary policy, the Fed will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. I said, this assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
To support the flow of credit to households and businesses, over coming months the central bank will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.
In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.
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