Fed keeps policy stable
The Federal Reserve on Thursday maintained its loose monetary policy and again pledged to do its best in the coming months to support the slowdown in the US economic recovery amid the spreading coronavirus pandemic and uncertainty over the presidential election..
The economy is still growing, but «I would not say that anyone likes it», said the Fed chairman Jerome Powell at a press conference after the last two-day Fed meeting on policy. «The first five, six months of expansion, we went better than expected … But we must be humble about this disease. She hasn't gone anywhere», – he stressed.
The short-term outlook is clouded by doubts about where fiscal policy will go in the coming weeks, or how smooth a possible transition will be between the incoming Democratic administration led by Joe Biden and the Lame Duck Administration led by the Republican President Donald Trump. This will continue to affect upcoming government funding decisions and the extension of the U.S. central bank's emergency programs..
Powell said the Fed is just now starting to consider whether the various emergency credit lines need to be renewed after they expire on December 31..
Fed Keeps Policy Stable As Biden Moves To Win
Federal Reserve System on Thursday maintained its loose monetary policy and again pledged to do everything in its power in the coming months to support the slowdown in the U.S. economic recovery amid the spreading coronavirus pandemic and facing uncertainty over the still pending presidential election.
In a political statement released after the Fed meeting, the elections were not mentioned, and Powell did not comment on the possible economic consequences of the protracted proceedings..
But the Fed chief said the U.S. economy is now recovering more slowly after being stimulated by fiscal measures and the reopening of some factories earlier in the year..
«A full economic recovery is unlikely until people are confident that a wide range of activities can be engaged again», – Powell told reporters, noting that while the housing market has fully recovered from the pandemic, service costs remain low.
He also said that the recent rise in the number of people with coronavirus infection in the United States and abroad «is of particular concern», and noted that social distancing and masks are necessary to contain the virus and support the economy.
The US stock market, which surged ahead of the Fed's announcement, has largely retained optimism and closed yesterday with growth. The yield on US Treasury debt securities remained largely unchanged, and the dollar remained weaker against a basket of currencies.
Recent Federal Reserve Monetary Policy
In a statement largely unchanged from a statement released at its September policy meeting, the Federal Open Market Committee of the Fed reiterated its pledge to use «full set of tools» to support the economy and promised not to consider raising interest rates until peak employment is restored and inflation surpasses the 2% target.
«Economic activity and employment continued to recover, but remain well below their levels at the beginning of the year», – said in a statement that the central bank's key overnight interest rate remains unchanged at near zero. «The COVID-19 pandemic is causing immense social and economic hardship in the United States and around the world», – notes the Fed.
The Fed said it will continue to buy government bonds in the amount of «least» $ 120 billion per month, and use other tools and programs as needed, depending on how the economy develops. Reducing expectations that «quantitative easing» could intensify in the coming months, Powell said that the Fed's existing bond buying program was discussed at the just-concluded meeting and is expected to provide adequate economic support.
The October U.S. Employment Report, due to be released by the Labor Department on Friday, will provide the latest data on how quickly the economy is returning millions of pandemic-laid workers back to their jobs..
Beyond that, the Fed will also be waiting to see if Biden actually becomes president and if Trump manages to stay in power. Any scenario can be important in terms of additional government spending to help the unemployed.
«Risks to economic recovery have increased since the last Fed meeting in September due to rising coronavirus cases, slowing job growth, lack of new incentives for consumers and small businesses, and now an unresolved presidential election. Greg McBride, Chief Financial Analyst at Bankrate.com. – The Fed has done what is possible at the moment, despite the fact that there are still a number of instruments».