Wednesday, August 10, 2022

Fed keeps rates and asset purchases stable as recovery weakens

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The Federal Reserve kept its principal interest near zero and asset purchases stable as it sought to maintain a massive dose of support for the US economy as it suffers from a further downturn.

After a two-day meeting on Wednesday, the first since Joe Biden replaced Donald Trump in the White House, the Federal Open Market Committee reiterated that it would continue to buy $ 120 billion in debt until ” further substantial progress ”has been made in the recovery, a target he set in December.

The Fed has described a weakening of the recovery as the United States suffers from the latest wave of coronavirus infections, which led to net job losses in December and weakness in other economic data.

“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors hardest hit by the pandemic,” the FOMC said. “Weaker demand and past declines in oil prices have dampened consumer price inflation.”

The Fed has said it will keep its main interest rate within its target range of 0 to 0.25 percent until the economy reaches full employment and inflation is on track to exceed. 2 percent for a while, repeating the forecast it has been holding since September.

The Fed’s commitment to maintain loose monetary policy with greater tolerance for inflation increases and a deeper commitment to full employment was articulated by Jay Powell, the Fed chairman, in August with a new statement on central bank long-term policy goals. On Wednesday, the Fed decided to reaffirm its commitment to these goals by reissuing the statement.

Fed policy is on hold as it weighs on offsetting momentum in the world’s largest economy, with near-term data showing a difficult recovery but medium-term outlook improving due to the ramp-up in vaccinations.

US stocks sold sharply on Wednesday as the S&P 500 fell 1.6 percent. Treasury bills, meanwhile, rallied, pushing the benchmark 10-year yield briefly below 1 percent. Yields fall as prices rise.


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