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While the Federal Reserve kept the interest rate stable in line with expectations, Fed Chairman Powell sent the message that the increase in cases is alarming.
According to the statement made by the bank, federal financing rates were unchanged and within the target band of 0 – 0.25 percent. Interest on excess reserves was also left at 0.10 percent. The Fed did not change its asset purchase program either. No change in the bank’s interests was expected.
At its September 15-16 meeting, the Fed signaled that it would keep interest rates stable until at least 2023 to help the US economy recover from pandemic problems.
Bond purchases will continue at current rates
While the decision was made unanimously, the Fed reiterated its determination to use all means to support the US economy and stated that bond purchases will continue at the current rate.
In the statement made by the Fed, it was emphasized that the weakening of demand and low energy prices keep inflation low, the verbal orientation in the supportive monetary policy continues, the pandemic represents a significant risk for the economic outlook and the recovery path of the economy depends on the course of the coronavirus pandemic.
In the statement, which said that economic activity and employment continue to recover, the level of the economy was compared with pre-pandemic levels. below and the pandemic will have an impact on activity, employment and inflation in the near future.
Fed Chairman Powell: Increase in New Cases Alarming
After the decision, Fed Chairman Powell told the meeting that he maintained that the recovery from the bottom of the economy accelerated with the reopening.
Powell said the increase in new cases is alarming. Stating that the pandemic had a serious impact on inflation, Powell said that it is not possible to fully recover until people feel safe about the epidemic. Expressing that he does not expect more restrictions from the government, Powell said that the new wave is more common in the epidemic and that consumers can delay their consumption.
Expressing that they believe the bond purchase programs support the economy, Powell emphasized that they will continue to review their asset purchases. Powell said they could change the composition, duration and volume of their bond purchases.
Stating that federal subsidies support the bottom line in household consumer spending, Powell said spending in the service sector remained low. President Powell noted that more financial and financial support is likely to be needed.
Powell reiterates request for financial support
Fed Chairman Powell reiterated his messages on financial support in the meeting’s question and answer session. Powell said financial support could have the effect the Fed couldn’t have on revenue, the more financial support the recovery would be.
By stating that fiscal policy is primary policy, Powell sent the message that monetary policy is in control. Powell said that the recovery is better than expected and that it is still far from the objectives.
“We have not made the decision to extend the emergency lines of credit after December 31, this is a decision we can make with the Treasury Department,” Powell said.
“We were not the focus of choice”
Fed Chairman Powell also answered questions about the US presidential election. Powell said the elections were not the focal point of the meeting and said the institutions of democracy should be allowed to function.
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