Federal Reserve Holds Rates, Asset Purchases Steady as Economic Activity Moderates
The central bank noted that economic activity and employment had moderated while the path of the economy will be determined by vaccinations
Federal Reserve Holds Rates, Asset Purchases Steady as Economic Activity Moderates
The Federal Reserve said Wednesday it would keep U.S. interest rates close to zero and continue its $120 billion-a-month bond-buying program.
“The pace of the recovery in economic activity and employment has moderated in recent months,” the committee said in a statement released after the meeting of the Federal Open Market Committee (FOMC). “The path of the economy will depend significantly on the course of the virus, including progress on vaccinations.”
Other key points from the statement:
- Key target rate for federal funds to stay in a range of 0% to 0.25%
- Fed plans to keep buying $80 billion of U.S. Treasury bonds and $40 billion of agency mortgage-backed securities every month.
- The panel agreed to continue accommodative monetary policy until inflation averages 2% over time. On average, the Fed doesn’t expect 2% inflation until 2023.
- Declines in oil prices and weaker demand across the board have held down inflation, the committee noted.
- Economists weren’t expecting any change in monetary policy this meeting, as answers to the question of when the COVID-19 pandemic will stop wreaking havoc on the economy remain elusive.
- The low interest rate environment is a boon for bitcoin and other high-yield investments that can offer the market alternatives to bonds
