The Federal Open Market Committee (FOMC) left its benchmark rate unchanged in the range zero to 0.25 percent and said it would continue its US$120 billion monthly bond purchases - Photo by Federal Reserves Office

JAKARTA (TheInsiderStories) – United States (US) Federal Open Market Committee (FOMC) agreed to hold the Fed Fund Rate (FFR) at the current level near to zero percent, said the chairman on Wednesday (08/19). The boards also lowering the economic growth of United States in the second half of this year.

According to the chairman, Jerome Powell in a virtual conference, the central bank “isn’t “even thinking about raising rates”. At the July meeting, the board of governors also decided to maintain monthly purchases of US$120 billion of US treasuries and mortgage-backed securities.

In their discussions, Fed officials noted that there had been an increase in uncertainty about the economic outlook since their prior meeting in mid-June. The policymakers sees that the COVID-19 outbreak was causing tremendous human and economic hardship across the United States and around the world.

Following sharp declines, economic activity and employment had picked up somewhat in recent months but remained well below their levels at the beginning of the year, said the minutes. Consumer price inflation was being held down by weaker demand and significantly lower oil prices.

Overall, they said, the financial conditions had improved, in part reflecting policy measures to support the economy and the flow of credit to US households, businesses, and communities. Members agreed that the Fed was 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 governor stated that the path of the economy would depend significantly on the course of the virus. In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.

“In light of these developments, members decided to maintain the target range for the federal funds rate at 0 to 0.25 percent. Members stated that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals,” the minutes stated.

The policymakers agreed that they would 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 that they would use the committee’ tools and act as appropriate to support the economy.

In determining the timing and size of future adjustments to the stance of monetary policy, members noted that they would assess realized and expected economic conditions relative to the maximum-employment objective and its symmetric 2 percent inflation objective. This assessment would 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, the board agreed that over coming months it would be appropriate for the Fed to increase its holdings of treasury securities and agency RMBS and CMBS at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, they agreed that to continue to offer large-scale overnight and term repo operations.

FOMC noted that they would closely monitor developments and be prepared to adjust their plans as appropriate. At the conclusion, the committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive.

“The Federal Reserve 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,” said the minutes.

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