Washington, Nov 6 | The US Federal Reserve has kept its benchmark interest rate unchanged at the record-low level of near zero while making no change to its pace of asset purchases amid election uncertainty and coronavirus resurgence concerns.
“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the Fed said in a statement on Thursday after concluding a two-day policy meeting, adding the path of the US economy will depend significantly on the course of the coronavirus, Xinhua news agency reported.
“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 Fed said.
While pledging to use its full range of tools to support the US economy “in this challenging time”, the central bank decided to maintain the target range for the federal funds rate at 0-0.25 per cent and continue its asset purchase program at the current pace of $120 billion per month.
“The recent rise in new Covid-19 cases, both here in the US and abroad, is particularly concerning. All of us have a role to play in our nation’s response to the pandemic,” Powell said, adding a full economic recovery is unlikely until people are confident that it’s safe to re-engage in a broad range of activities.
Powell also noted that more fiscal and monetary policy support is needed to bring the US economy back on track to its pre-pandemic levels.
“It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year. And it may take continued support from both monetary and fiscal policy to achieve that,” he said.
The Fed meeting came as the US added record-breaking 100,000 plus new Covid-19 cases in a single day on Wednesday, while people nationwide are waiting for the outcome of the presidential election.
“The economy continues to expand, albeit at a slower pace than in the third quarter.
However, the economic outlook is clouded by uncertainties related to the pandemic as well as the yet to be determined presidential election,” Jay H. Bryson, chief economist at Wells Fargo Securities, wrote Thursday in an analysis.
“Given this backdrop, the committee apparently concluded that it would be appropriate to maintain a steady course at today’s meeting and continue to watch incoming data and developments before making any policy adjustments,” Bryson wrote, referring to the Fed’s policymaking committee.
While there was no policy change, the Fed, facing the possibility of a divided government in Washington, “remains the only game in town” when it comes to providing sustained accommodation to an impaired economy, said Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP.
Brusuelas believed the upcoming minutes of the Fed meeting will “almost certainly include discussion around increasing the pace and intensity of asset purchases this year or next.”
“In our estimation, the probability of a $2 trillion stimulus is rapidly fading, and the central bank, like other central banks around the world, will again consider further unorthodox monetary policies should the pandemic intensify beyond what is currently thought,” Brusuelas said.
Powell said at the press conference that the Fed’s holdings of securities are rising at a substantial rate of $120 billion per month, including $80 billion in US treasuries and $40 billion in agency mortgage-backed securities.
“Looking ahead, we will continue to monitor developments and assess how our ongoing asset purchases can best support our maximum employment and price stability objectives, as well as market functioning and financial stability,” Powell told reporters.