With the economy still experiencing significant disruptions due to the coronavirus pandemic, the Federal Reserve will maintain the target range for the federal funds rate at 0 to 0.25%, the Federal Open Market Committee announced today. The committee noted that “overall financial conditions have improved in recent months,” but that “the path of the economy will depend significantly on the course of the virus.”
In a press conference after the release of the FOMC statement, Fed Chairman Jerome Powell noted that while some areas of the economy—such as job gains and consumer spending—have rebounded “sooner and stronger than we expected,” incoming data tracked by the Fed suggest things have slowed down overall since coronavirus cases began to spike again in June.
“Some measures of consumer spending based on credit card and debit card data have moved down,” Powell said. “Recent labor market indicators point to a slowing in job growth, particularly among smaller businesses. Hotel occupancy rates have flattened out, people aren’t going out to restaurants, bars, gas stations, pharmacies and beauty salons as much. . . . On balance, it looks like the data are pointing to a slowing in the pace of the recovery. But I want to stress that it’s too early to say both how large that is and how sustained it will be.”
Powell also warned that the second quarter GDP contraction is “likely to be the largest on record.”