The Federal Reserve has kept monetary policy stable with interest rates at the lowest level and there is no change to their bond purchases, as Jay Powell has warned that an increase in coronavirus cases are pervasive. the world is “particularly troubling”.
In a statement on Thursday, the Federal Open Market Commission said it would keep federal funds interest rates as low as 0% to 0.25% – and reiterated their pledge to stay there for until the pandemic-affected economy achieves full employment with higher inflation.
During his press conference, Fed Chairman Powell, emphasized the risk stemming from the increased infection rate.
“The recent increase in new Covid-19 cases in both the US and abroad is particularly troubling,” he said. Even without large-scale door locks, economic activity could be affected by shoppers withdrawing after they start returning to bars, restaurants and hotels, he said.
“They can withdraw in a situation where cases are everywhere in your city, in your state, in your community,” said Mr Powell.
As the US presidential race votes are still being counted, with the results still uncertain, the Fed chairman said he was “very reluctant” to comment on the results “directly or indirectly”.
Although the election was discussed “now and repeated” by Fed officials, it was not the “focus” of the meeting. “This is a good time to take a step back and let our democratic institutions do their work,” he said.
However, he did mention the importance for Congress and the White House to provide greater financial support to the US economy, as previous stimulus has run out. Work on a new aid package has stalled amid political disagreement in Washington.
“We all went through the years after the global financial crisis, and for a number of years, in the midst of a recovery, the fiscal policy was quite tight,” said Mr Powell. “I think we’ll have a stronger bounce if we can get at least some financial support.”
Fed officials have met amid a sharp increase in financial assets this week. Global equities rallied higher alongside other risky assets, while US government bonds reversed the sell-off that rose during Tuesday’s election.
Investors believe that falling bond yields this week have reduced the urgency for the Fed to change the structure of its bond buying program in favor of longer-term liabilities. It currently buys $ 80 billion in all-time treasury stocks each month in an effort to reduce borrowing costs and support the US economy.
The Fed reiterated that it plans to increase its debt holdings “at least at the current rate to keep the market running smoothly and help to promote the right financial conditions.” Mr. Powell said the FOMC had “full discussion” around the “adjustment [the] parameter ”of the asset purchase program but feels that the current stance is correct. “It’s doing a lot of good things,” he said.
John O’Connell, a portfolio manager at Garda Capital Partners, said there would be a need for a serious decline in economic data or a “rapid and illiquid” provision in Warehouse returns. silver to promote policy change.
“Until they are forced to act, they won’t,” he said.
The FOMC only made very small changes to its outlook statement on Thursday. It said employment had “continued to recover”, while in September it said employment had “increased”. Financial terms are “consistent”, it says; In the last meeting, it was said that they had “improved”.
“The path of the economy will depend significantly on the progress of the virus,” the Fed said in its statement. “The ongoing public health crisis will continue to weigh on economic activity, employment and inflation in the coming time, and pose significant risks to the economic outlook in the medium term.”
The FOMC statement received unanimous support from the voting members. While in September Robert Kaplan, Dallas Fed chairman, disagreed, joining the consensus on Thursday. Neel Kashkari, the Minneapolis Fed president, who also disagreed in September, was replaced by the meeting by Mary Daly of the San Francisco Fed, who voted in favor of the policy.