Fed Maintains Rates as Pandemic-Related Economic Hardship Continues

The Federal Reserve will continue keep its target range for the federal funds rate at zero 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 that it expects to maintain that range until the labor market reaches what the committee assesses to be maximum employment and inflation has risen to 2% and stays on track to moderately exceed 2%. The Fed added that it will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until further progress is made toward its goals of maximum employment and price stability.

In a press conference after the release of the FOMC statement, Fed Chairman Jerome Powell said that “recent news on vaccines has been very positive. However, significant challenges and uncertainties remain with regard to the timing, production, and distribution of vaccines, as well as their efficacy across different groups. It remains difficult to assess the timing and scope of the economic implications of these developments. The ongoing surge in new COVID-19 cases, both here in the United States and abroad, is particularly concerning, and the next few months are likely to be very challenging.”