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The Fed claims that interest rates will remain low for a long time, at least until 2023, to cope with the economic effects of the corona pandemic.
Two out of ten members voted against keeping the interest rate unchanged. One of the objections of members was the lack of flexibility and one pushed for an even tougher line by waiting until inflation reached 2 percent during a stable period.
The Fed gives in its valuation a brighter picture of economic development than in the last meeting in June. The US economy was then predicted to contract 6.5 percent in 2020, followed by a 5 percent recovery next year and 3.5 percent in 2022. The Fed now believes GDP will only fall 3 , 7 percent this year and then it will increase. with 4 percent in 2021, 3 percent in 2022 and 2.5 percent in 2023. Unemployment is also expected to be lower for the year than the Fed previously predicted, the forecast changes from 9.3 percent to 7.6 percent.
Fed chief Jerome Powell promised in his speech after the interest rate announcement that he would continue strong support for the economy.
“The only question is how much and when,” he added.
Wall Street first responded positively on the US Federal Reserve’s interest rate announcement and assessment of the economy on Wednesday, but then mouths declined.
The worst were IT and technology stocks, and the losers were Apple and Microsoft, down 2.9 and 1.8 percent, respectively.
However, the financial sector resisted and several of the major banks complied. Citigroup was up 3.0 percent and Wells Fargo up 3.7 percent.
The Dow Jones Industrial Average rose 0.1 percent, the Nasdaq Composite Heavy Technology Index fell 1.2 percent and the S&P 500 fell 0.5 percent.
Carl Johan von Seth: Creative Interest Rate Policy Will Boost US Recovery
