By Christopher Rugber, AP Economics Writer
WASHINGTON (AP) – The Federal Reserve on Wednesday resolved to maintain its low interest rate policies well after recovering from the economy’s viral epidemic.
The Fed said in a statement after its latest policy meeting that reforms in the economy and job market have slowed in recent months, especially in industries affected by the raging epidemic. Officials kept their benchmark short-term rates near zero and said they would continue to buy treasury and mortgage bonds to rein in long-term lending rates and support the economy.
Policymakers also warned that the virus poses a risk to the economy and removed from their previous statements those phrases that said the epidemic was weighing on the economy in the “near term” and that it would “in the medium term Risk “removed. These phrases suggest that Fed officials are not sure how long the uncertainty will last.
For now, the job market, in particular, is faltering, with nearly 10 million jobs still lost to the epidemic that erupted 10 months ago. Hiring has been slow for six months, and employers have left the job in December for the first time since April. The job market has gained momentum as epidemics and cold weather have discouraged Americans from traveling, shopping, dining, or visiting entertainment sites. Retail sales declined for three months.
At a news conference, Chair Jerome Powell was pressured that the Fed should respond to the recent speculative surge in the prices of some individual stocks, most notably Gametop’s shares, and whether that frenzied buy led to an alarming increase in overall stock prices Bubble suggested. Powell defied questions by saying that the Fed’s interest rate policies are not well suited to address speculation in the stock market.
In addition, he said, “If you notice that asset prices have actually been rising over the last few months, this is not monetary policy. These are expectations about vaccines and fiscal policy. Those are news items that have been in recent times. Are raising property values over the months. “
In its statement on Wednesday, the Fed added a reference to vaccination – a sign that policymakers, along with most economists, envisioned a sharp rebound in the second half of the year, as the virus vaccinated and controlled by government-funded rescue funds is. Spreads through the economy. Luckily Americans save hugely to maintain their jobs, which, with great demand, with a big lift to the economy, once consumers are safe about resuming their old spending patterns To feel, can suggest without demand.
Pavel said when asked about how the Fed’s rollout could affect Fed policy: “There is nothing more important than the economy that people are getting vaccinated. If you think of places where the economy is weak Is, as I mentioned bar and restaurant. This is the 400,000 jobs we lost last month, and all this is due to the outbreak of the epidemic. “
He said: “We don’t live yet. We as a country need to stay focused on that and get there.”
The Fed has indicated that it expects to keep its key short-term rate low between zero and 0.25% through at least 2023. Earlier this month, Vice Chairman Richard Clarida said he expected the Fed to expand through the end of bond purchases this year, which would mean continuing downward pressure on long-term lending rates.
Since the Fed last met, in mid-December, there has been some good news. Distribution of an effective vaccine has begun, and a $ 900 billion relief package was created in late December. President Joe Biden has since proposed another financial aid plan – a $ 1.9 trillion package that is larger than many economists had expected and would require congressional approval.
In recent months, Powell has repeatedly urged Congress and the White House to provide such stimulus. Some central bank officials have suggested that they might consider withdrawing the Fed stimulus later this year, before investors usually expect it, though Powell made a public appearance earlier this month on how Denied.
In December, the Fed said it would continue its bond purchases until it could move towards achieving its goals of low unemployment and stable inflation of about 2% per year.
The Fed wants to avoid a replay of 2013, when Chairman Ben Bernanke told Congress that he was busy when the Fed was considering buying bonds. Bernanke’s comment made the market oblivious and sent long-term rates jumping – an event that had come up. Called “taper tantrum”.
The Fed’s drive to keep long-term rates low helped lower mortgage rates and boosted home sales and price increases. In November, US house prices rose at the fastest pace in more than six months, according to the S&P CoreLogic Case-Shiller 20-city Home Price Index, a 9% increase from 12 months earlier.
Additional incentives and the prospect of ongoing vaccinations have raised some concerns as Americans eventually release punch-up demand for airline tickets, hotel rooms, new clothes and other goods and services, the economy may pick up and annual inflation. The Fed may rise more than 2%. aim. If many companies do not initially have the capacity to meet that demand, then prices will increase. Yet most Fed officials appear unconcerned about trends that potentially ignore fugitive price increases.
The Fed is never expected to raise rates because last year it adopted a framework that calls for inflation to average 2% over time. Given that inflation in 2012 has fallen far below that level since the Fed adopted it as a target in 2012, policymakers should allow inflation for some time below 2% for years of below-target price increases. Will have to walk upstairs.
AP Economics writer Martin Krutsinger contributed to this report.
Copyright 2021 The Associated Press. All rights reserved. This content may not be published, broadcast, rewritten or redistributed.