Federal Reserve Board Chairman Jerome Powell
The US Federal Reserve has kept its benchmark interest rate unchanged at a record-low of zero, while indicating that the central bank may soon begin to reduce asset purchases despite ongoing economic uncertainty.
The Fed on Wednesday pledged to continue its asset purchase program at the current pace of at least $120 billion a month until “considerable further progress” on jobs and inflation since last December, Xinhua news agency reported. “It hasn’t happened.
Federal Open Market Committee (FOMC), the Fed’s policy, states, “Since then, the economy has made progress toward these goals. If progress continues as widely expected, the committee decides that there should be an increase in the pace of asset purchases.” Moderation may soon be necessary.” The making committee said in a statement after a two-day meeting.
“The Committee will be prepared to adjust the monetary policy stance as appropriate if risks emerge that could hinder the achievement of the Committee’s goals,” the statement said.
In a virtual press conference on Wednesday afternoon, Fed Chair Jerome Powell said that sectors most affected by the pandemic have improved in recent months, but a rise in Covid-19 cases slowed recovery.
“The delta version caused a significant increase in COVID-19 cases, resulting in significant hardship and harm and slowing economic recovery. Continued progress on vaccination will help contain the virus and support a return to more normal economic conditions,” They said.
Powell also said Fed officials lowered their forecasts for the country’s economic growth this year compared to three months ago, “partly reflecting the impact of the virus”.
The US economy is expected to expand at 5.9 percent this year, down from the 7 percent projected in June, according to the average forecast for the Fed’s latest summary of economic projections released on Wednesday.
The average estimate of inflation for the end of this year, measured by the annual growth in the personal consumption expenditure (PCE) index, rose to 4.2 per cent from 3.4 per cent in June, well above the central bank’s target of 2 per cent.
“As for inflation, we’ve made more progress than we’ve made significant progress,” Powell said, adding that a substantial test of further progress for employment has been “all but met.”
“Once we’ve met those two tests, the next meeting may come as soon as that, the committee will consider that test and look at the broader environment at that time and decide whether to taper off,” he said. .
“While no decision has been made, participants generally feel that as long as recovery remains on track, a gradual tapering process ending in the middle of next year is likely to be appropriate.”
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