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Stable interest rate is close to zero



The Federal Reserve kept short-term interest rates close to zero in a decision on Thursday that was characterized by a growing economy but not nearly as close as it was before the coronavirus pandemic struck.

As markets widely predict, the Fed has kept its benchmark rate fixed in the range of 0% -0.25%, which has been the level since an emergency cut seven months ago in its early days. of the pandemic coronavirus.

There were a few language changes in the statement following the meeting of the Federal Open Market Commission, although the panel noted that the economy continues to struggle.

“Economic activity and employment have continued to recover but are still at a much lower level than they were at the beginning of the year,”

; the statement said.

The language is a slight downgrade from a September statement that noted that economic activity has “increased in recent months.”

Markets reacted little to this news, with stocks continuing to rally while the dollar fell.

The Fed’s decision to keep stability comes amid concerns about the direction of the economy as the Covid-19 cases accelerate and public officials consider restrictions on possible activities. hindering growth. As it has done many times before, the Fed stressed that the growth trajectory largely depends on the coronavirus path.

The Fed has sought to use adjustment policy to stimulate growth, although officials have warned in recent months that more needs to be done on the financial side.

The Commission has also revised its views on financial conditions, saying on Thursday it “is still adapting”, as opposed to September’s assessment that conditions “have improved.”

In the third quarter, the US gross domestic product grew the fastest-ever, growing at an annual rate of 33.1% after falling 31.4% in the previous period. The economy recovered 11.4 million of the 22 million jobs lost in March and April, but payroll growth has slowed in recent months and is expected to drop to 530,000 by October. .

However, Congress and the White House remain locked in talks to provide more financial help. Election results, if they hold as many market participants expect, could mean spending at the low level of what has been classified through various proposals.

The Fed’s decision was unanimously agreed at this meeting, although that was not the case in September, when the two members opposed a new approach to inflation that would cause the FOMC to stop raising rates until Inflation exceeded the target by 2%.

The statement made no changes to its new approach to the “flexible average inflation target,” an attempt by the Fed to achieve a task the Fed has not achieved in most of the past decade. The key element of the new approach is a commitment not to raise interest rates even when the unemployment rate plummets, which was previously seen as a major sign that inflation will rise.

The Feds have previously used advance rallies to stem price pressure, but that won’t happen under the new regime.


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