Washington: US Fed keeps interest rates near zero. The US Federal Reserve has kept its benchmark interest rate unchanged at the record-low level of near-zero and hinted towards maintaining it until at least 2023, noting that the path of the economy will depend significantly on the Covid-19 situation.US Fed keeps interest rates near zero. After the conclusion of a two-day policy meeting, the Federal Open Market Committee (FOMC) on Wednesday, the Fed’s policy-setting body, decided to keep the target range for the federal funds rate at 0 to 0.25 percent, a level that hasn’t been changed since March, reports Xinhua news agency.
The committee expects it will be appropriate to maintain this target range “until the labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time”, according to the FOMC.
The policy meeting was the first since the central bank in late August adopted a new monetary policy framework, which seeks to achieve inflation that averages 2 percent over time.
Under the new framework, the Fed said, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.
When asked to explain the specifics about inflation overshooting, Fed Chairman Jerome Powell said at a virtual news conference Wednesday afternoon that “we’re resisting the urge to try to create some sort of a rule or a formula here”.
Powell said the economic recovery has progressed more quickly than generally expected, but overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain.
The central bank chief noted roughly half of the 22 million jobs that were lost in March and April have been regained as many people returned to work, and the unemployment rate remained elevated at 8.4 percent as of August.
He added that the level of unemployment is probably 3 percent higher than the official data, considering those people who are misidentified as employed and the declined labor force participation.
Looking ahead, the FOMC projected the unemployment rates to continue to decline, according to the latest economic projections. The median projection for the unemployment rate is 7.6 percent at the end of this year, and 4 percent by the end of 2023.
It’s still above the historically low of 3.5 percent the country experienced before the Covid-19 pandemic.
Inflation, meanwhile, is expected to reach 1.2 percent by the end of this year, and will gradually pick up before reaching 2 percent by the end of 2023, the median projection showed.