JAKARTA (TheInsiderStories) – The Federal Reserve (Fed) decides to hold interest rates at zero to 0.25 percent and promises to keep the policy until the United States (US) economy recovers. The central bank is also committed to using its full range of tools to support the largest economy in this challenging time.
Based on the Federal Open Market Committee (FOMC) notes, the COVID-19 outbreak is causing tremendous human and economic hardship across the US and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses.
The policymakers also rated, the weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity in America and abroad have significantly affected financial conditions and have impaired the flow of credit to the country’ 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. 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,” said the notes.
At the press conference, Fed chair, Jerome Powell offered no sanguine words about how fast the country might return to the near-record low unemployment and solid growth. He said, a first phase of a recovery may actually happen soon as some US states allow stores and even restaurants to reopen under tightened rules.
Recently, the central has rolled out around US$2 trillion in lending commitments, and he said it was ready to do more as needed. He said, new programs to buy corporate bonds and lend to mid-sized companies are in the end stages of development and will be ready “soon”.
The board of governor stated, 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.
Then, the policymakers said, to support the flow of credit to households and businesses, the Fed will continue to purchase treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support 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 Board will closely monitor market conditions and is prepared to adjust its plans as appropriate.
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