Federal Reserve Chair Jerome Powell said Wednesday the outlook of the American economy remains “extraordinarily uncertain,” and recovery will depend on keeping the novel coronavirus in check.
“Full economic recovery unlikely until people are confident that it is safe to reengage in a broad range of activities,” Powell said during a news conference after the Fed kept its benchmark interest rate unchanged at 0.25% in its last scheduled policy meeting before the 2020 US presidential election.
“We expect that it will be appropriate to maintain the current 0-0.25% target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2% and on its track to moderately exceed 2% for some time,” he said.
The Federal Open Market Committee’s (FOMC) new objective is to allow inflation rate to climb above its previous target of 2% for some time in order to see the economy improve.
The Fed’s new dual-mandate includes price stability and maximum employment, the latter seen as a “broadbase and inclusive goal,” according to Powell.
The Chair, in addition, called for the US government to provide further assistance with fiscal policies.
“The path forward also depends on policy actions that have taken across all parts of the government to provide relief and support the recovery as long as it is needed,” he said.
However, Democrats and Republicans have so far failed to reach an agreement on a new relief bill amid the coronavirus pandemic that would help the Americans, consumer spending and employment.
“We expect to maintain an accommodative stance of monetary policy until maximum employment is achieved,” Powell said, indicating that interest rates are set to remain low in the long run.
He also noted that the Fed will continue to increase its holding of treasury securities and agency mortgage-backed securities at the current pace in coming months.
He said those asset purchases are intended to sustain smooth market functioning and help foster financial conditions, therefore supporting flow of credit to households and businesses.
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