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In the statement made by the Fed, it was indicated that the decision to keep the interest rate constant was taken unanimously.
In the repeated statement, it was emphasized that the Fed maintained its commitment to use all its tools to support the US economy in this difficult period, thus supporting the maximum targets for employment and price stability.
The statement noted that economic activity and employment continued to recover, but remained well below the levels of the beginning of the year.
In the statement, which noted that weaker demand and the previous drop in oil prices reduced consumer inflation, it was stated that general financial conditions continue to be favorable for the economy.
Monthly asset purchases will continue at least $ 120 billion
In the statement, it was emphasized that the direction of the economy will largely depend on the course of the virus, noting that the public health crisis will continue to put pressure on economic activity, employment and inflation in the short term, and pose significant risks. in the economic outlook in the medium term.
The Federal Open Market Committee (FOMC) recalled the maximum long-term employment goal and 2 percent inflation, and it was indicated that the supportive stance of monetary policy is expected to remain until these goals are reached.
The statement reported that it was agreed to keep the target range for the federal financing rate between 0 and 0.25 percent.
In the statement, which also noted that the bank will continue to buy assets, “significant progress” has been made on maximum employment and price stability targets, totaling $ 120 billion, including at least $ 80 billion per month. for treasuries and $ 40 billion a month for purchases of mortgage-backed securities. It was reported that it will continue.
On the other hand, it was observed that the Fed extended the dollar swap lines until September 2021.
Growth forecast revised upwards
The Fed, which also made predictions for the economy, noted that there will be no changes in interest rates until 2023.
In the statement, it was noted that the Fed’s median expectation for the financing rate was 0.1 percent for 2020, 2021, 2022, and 2023, and the long-term average interest expectation was 2.5 percent. .
In the statement, the long-term growth expectation for the US economy fell from 1.9 percent to 1.8 percent, and the country’s economy, which is expected to contract 3.7 percent this year in projections, is estimated to September, to contract by 2.4 percent in 2020. The statement predicted that the economy will grow 4.2 percent in 2021, 3.2 percent in 2022 and 2.4 percent in 2023.
The statement, which also includes estimates of the unemployment rate, indicated that the unemployment rate in the country is expected to be 6.7 percent this year, 5 percent in 2021, 4.2 percent in 2022 and 3 , 7 percent in 2023.
In the statement, it was said that inflation is projected to be 1.2 percent this year, 1.8 percent in 2021, 1.9 percent in 2022 and 2 percent in 2023.
Statement from Fed Chairman Powell
Powell held a teleconference press conference after the Fed held the monetary policy rate stable at 0-0.25 percent.
Emphasizing that they are extremely determined to achieve their monetary policy objectives, Powell recalled that they have taken strong measures since the beginning of the epidemic of the new type of coronavirus (Kovid-19) to ensure the stability and recovery as strong as possible and limit the permanent damage suffered by the economy.
Stating that they strengthened their verbal guidance, Powell asserted that these measures will ensure that monetary policy provides strong support to the economy until the recovery is complete.
“The pace of recovery has slowed down in recent months”
Noting that economic activity continues to recover, Powell recalled that the significant return to normality in the economy provided a rapid recovery in economic activity and the economy grew 33 percent in the third quarter. “But the pace of the recovery has slowed in recent months,” Powell said. found the evaluation.
Noting that the recovery is progressing faster than expected overall, Powell said economic growth forecasts were also revised.
“In general, economic activity is well below its previous level and the way forward is quite uncertain,” Powell said. said.
Noting that the rate of recovery in the labor market slowed as in general economic activity, Powell asserted that labor market participation was especially below pre-epidemic levels.
“The continued increase in Kovid-19 cases is alarming”
Noting that the epidemic also had significant effects on inflation, Powell said inflation overall remained below the long-term target of 2 percent.
Commenting on the economic outlook, Fed Chairman Powell said:
“As we have emphasized throughout the outbreak, the outlook for the economy will be extraordinarily uncertain and will depend largely on the course of the virus. Recent news on vaccines is very positive. However, significant challenges and uncertainties remain regarding timing. , the production and distribution of vaccines, as well as their effectiveness in different groups. It is still difficult to assess their timeliness and scope. The ongoing increase in COVID-19 cases both in the United States and abroad is particularly worrying and the upcoming months will probably be very challenging. ”
Emphasis on financial support
Powell emphasized that they will maintain the supportive stance of monetary policy until employment and inflation targets are met, until labor market conditions reach levels consistent with the maximum employment evaluations of the Federal Open Market Committee (FOMC), the inflation rises to 2 percent and moderately exceeds 2 percent for a time. He said it would be appropriate to keep the current target range of 0-0.25 percent for the federal funding rate.
Noting that the bank’s asset purchases will continue, Powell said: “We believe that the increase in our balance sheet this year has eased financial conditions and provided significant support to the economy.” said.
Powell said that interest rate and balance sheet instruments provide strong support to the economy and will continue to do so. Reiterating that direct financial support may be necessary, Powell continued:
“Fiscal policy measures taken so far have made a significant difference to families, businesses, and communities across the country. The current economic recession is the most severe setback we have ever seen. It will take some time to return to the levels of economic activity and employment that prevailed earlier this year, and achieving this may require constant support from monetary and fiscal policy. “
“We will have to continue to support the economy for a long time,” Powell said, there is much more they can do. said.
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