Wednesday’s post-meeting statement of the Federal Reserves Federal Open Market Committee reaffirmed its concern over the coronavirus pandemic and its impact on the economy and health of all Americans. The Committee voted to hold its benchmark target federal funds range at 0.00 percent to 0.25 percent. Analysts do not expect the Fed to raise its key interest rate more than once in the next three years.
Federal Reserve Chair Jerome Powell said that the sharp increase in Covid-19 cases in mid-June kept the economy from recovering after the virus pandemic caused a historic plunge in the U.S. Gross Domestic Product during the second quarter.
Chair Powell described the resurgence of Covid-19 as “flattening the curve of the recovery,” and said that efforts taken to control the virus are “critical.” Restoring the economy to normalcy will require national responses designed to stop the rapid spread of the highly contagious virus.
Fed Chair Powell said the pandemic and its fallout caused the biggest shock to the U.S. economy in living memory.
FOMC Statement Commits to Using its Full Range of Tools to Ease Impact of Pandemic
The Federal Open Market Committee reasserted its commitment to using ”all available tools to support the U.S. economy during these challenging times.” The Committee’s monetary policy decisions are based on two legal mandates to achieve maximum employment and price stability.
Committee members said that although the economy has recovered since the initial coronavirus outbreak, economic readings remain far below their pre-pandemic levels. The Fed statement said that the path of economic recovery depends significantly on the course of the virus. The Fed expects the pandemic to severely impact the economy in the near term and to continue damaging the economy in its mid-term forecasts.
The Fed will continue to purchase Treasury bonds and mortgage-backed securities to support credit flow to businesses and households. The FOMC statement stressed the Committee’s flexibility in dealing with current and emerging economic conditions; members will review domestic and global financial conditions and will change monetary policy according to developments.
Last week’s economic reporting included readings on sales of new and previously owned homes. State and federal data on new and continuing jobless claims were released along with Freddie Mac’s weekly report on mortgage rates.
Last week’s economic reports included readings from the National Association of Home Builders on housing markets along with Commerce Department data on housing starts and building permits issued. Weekly reports on mortgage rates and unemployment claims were also released.