The fed’s comments after a meeting of the Committee, on Wednesday said that the Central Bank continues to do everything to support the US economy in difficult conditions. Recent data indicate that the pace of economic recovery slowed because of new outbreaks COVID-19 in several States.
Officials of the Federal open market Committee (FOMC) after a two-day meeting on Wednesday came to the unanimous decision to keep rates at “zero level” in the range of 0% to 0.25%, which was introduced in mid-March to protect the U.S. economy from recession amid the pandemic.
“We want to use the full range of tools to support our economy in these difficult circumstances,” said fed Chairman Jerome Powell.
Among the measures of the monetary regulator – the continuation of bond purchases and a range of lending programs and support liquidity of commercial banks.
The Committee the fed stated that it will extend a dollar swap operations and the temporary repo until 31 March 2021. The line swap was installed during the current crisis as a way of maintaining the flow of U.S. dollars to the organizations, including global Central Bank and commercial banks who need currency.
According to Powell, this decision does not reflect any problems with the market, but rather is a guarantee that the fed will maintain a line swap as well as operations of crediting and liquidity until they are needed.
“In the markets now is not anything that would cause any concern. We want these measures acted as support for the markets,” he said.
Powell repeated his earlier statements in June that the fed is “and do not think about raising rates,” “zero rate” will likely remain until 2022.
According to the statement by Powell, the rates will remain the same as long as officials “are not convinced that the economy has weathered recent events, and is on track towards achieving its objectives of maximum employment and price stability”.
Pandemic hampers economic recovery in the United States
The fed said: “financial conditions overall in recent months has improved, partly reflecting policy measures to support the economy and the flow of loans to households and enterprises in the United States.” However, “the Decline in demand and a significant reduction in oil prices restrain consumer price inflation”.
“After a sharp decline in economic activity and employment have increased somewhat in recent months, but indicators remain well below their levels at the beginning of the year,” the statement said.
It is expected that in a government report published on Thursday, will be registered a record annual fall in production by 34% last quarter.
Due to the new outbreak COVID-19 in July, the employers small business has suspended the resumption of recruitment and the rate of recovery of the labor market has slowed.
Another negative factor is the decline in consumer spending, which accounts for two-thirds of the U.S. economy. The decrease is due to the expiration of additional payments for unemployment benefits in the amount of $600 per week. The date for payment of such aid to end this week, while legislators of the Congress have not yet come to agreement on what action will follow after the cancellation of these payments.
In his comments, Powell said that future fed policy will largely rely on data on the incidence of COVID-19.
“The path of the economy will essentially depend on the spread of the virus,” – said in a statement.
“The most notable and important is the statement that the path of the economy will depend on COVID-19. In its statement, the fed raises again the issue of health in the first place,” said Nela Richardson, investment strategist at Edward Jones in St. Louis. “That’s a little intimidating, to be honest. … This sentence shows the superiority of the COVID-19 in their Outlook and the uncertainty of their worldview because of this,” said Richardson.