Fed keeps interest rates on hold, warns of further pandemic impact on the economy
“The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” said the central bank in its November monetary policy statement.
For the months to come, the Fed committed to buying more Treasury and agency mortgage-backed securities at least at the current pace of purchases to continue supporting financial market conditions. Fed Chairman Jerome Powell said during a press conference Thursday that the Fed currently buys $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities a month.
An internal Fed survey in September showed the central bank officials expect to keep interest rates on hold through 2023.
“The current economic downturn is the most severe in our lifetimes,” Powell said Thursday.
The Fed slashed interest rates to near zero in March in the wake of the pandemic crisis. Since then, the central bank has launched various lending facilities to help the economy recover.
But Powell has repeatedly called for more government stimulus to go along with the monetary stimulus the Fed is providing.
With no clarity on who will win the presidential election, it’s unclear what kind of stimulus package the next administration will put forward.
Powell said that while economic activity and joblessness have improved since the second quarter, the pace of improvement has moderated in recent months.
“Economic dislocation has upended many lives and left significant uncertainty for the future,” Powell said.
Last week, the central bank reduced the minimum amounts for loans from its Main Street Lending Facility, which is designed to help small businesses through the pandemic crisis. Main Street loans can now be as small as $100,000, compared with the previous minimum of $250,000. Fees for the loans were also reduced.
This is a developing story. It will be updated
