In their first meeting in 2021, Federal Open Meeting Committee left the Fed fund rate and its pace of bond buying unchanged on Wednesday (01/28) - Photo by Federal Reserves Office

JAKARTA (TheInsiderStories) – In their first meeting in 2021, Federal Open Meeting Committee (FOMC) left the Fed fund rate and its pace of bond buying unchanged on Wednesday (01/27). The policymakers kept the benchmark rate in the range of zero to 0.25 percent and maintained its US$120 billion monthly pace of bond purchases.

The committee also flagged a concerning slowdown in the pace of the economic recovery. The Fed steady stance shifts the spotlight to how soon and how much fiscal stimulus of the United States (US) Congress. As known, stimulus checks and extended unemployment insurance have been important to the US economic recovery.

Though the US’ vaccination program may help the economy reopen and rebound more fully later this year, for now the policymakers signaled a deep hole, with high levels of joblessness, ailing small businesses, and a recent surge in COVID-19 infections.

According to the statement, the unchanged rate decision comes as the near-term economic backdrop has weakened at a time when consumers appear to be battening down the hatches following a slowdown in the labor market recovery. It said, the pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.

But this weakness will likely prove transitory as the pace of recovery is expected to gather momentum in second of half the year amid ongoing efforts to roll out vaccines and further support from fiscal stimulus. In the December’ meeting, the FOMC signaled that it was no hurry to hike its benchmark rate anytime soon until 2023.

The chairman, Jerome Powell, said the Fed will likely take a “wait and see approach” to a potential post-pandemic rise in inflation, which he expects would prove to be “transient.” The economy, he added, still a long way from US employment and inflation goals, and its likely to take some time for substantial further progress to be achieved.

He assured, that the central bank 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. FOMC noted, the COVID-19 pandemic is causing tremendous human and economic hardship across the US and around the world.

The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation.

“Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses,” wrote the statement.

The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.

The policymakers 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 and will 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 Fed expects to maintain an accommodative stance of monetary policy until these outcomes are achieved,” concluded by the FOMC.

Written by Editorial Staff, Email: theinsiderstories@gmail.com