Fed Maintains Rates as Economic Hardship Continues

The Federal Reserve will keep its target range for the federal funds rate at 0 to 0.25% as the economy remains well below levels of output seen at the start of the year, even as economic recovery continues, the Federal Open Market Committee said today. The committee said it expects to maintain that range until the labor market reaches maximum employment (based on the committee’s assessment) and inflation has risen to 2% and stays on track to moderately exceed 2%.

“The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the committee said in its statement.

Weaker demand and declines in oil prices earlier in the year have been holding down consumer price inflation, the committee said, adding that “financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

In a press conference after the release of the FOMC statement, Fed Chairman Jerome Powell said that “as we have emphasized throughout the pandemic the outlook for the economy is extraordinarily uncertain and will depend in large part on the success on efforts to keep the virus in check. The recent rise in new COVID-19 cases both here in the United States and abroad is particularly concerning.”

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