US Federal Reserve keeps policy rates unchanged as pandemic hits economy

The US Federal Reserve on Wednesday announced that its Federal Open Market Committee (FOMC) left the benchmark interest rate, the target range for federal funds, unchanged at 0-0.25 per cent. 

The Fed reiterated that its commitment to using its full range of tools to support the US economy and noted that the path of the economy will depend on the course of the coronavirus outbreak.
“The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum employment and price stability goals.
“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” Fed stated in its policy review.
The Fed noted that weaker demand and significantly lower oil prices are holding down consumer price inflation, although overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses.
The statement noted the near term effects of the ongoing public health crisis on economic activity, employment, and inflation, and risks to the economic outlook over the medium term. “In light of these developments, the committee decided to maintain the target range for the federal funds rate at 0 to 1/4 per cent.”
Fed said the committee would maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
Fed plans to increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to support the flow of credit to households and businesses, over coming months and sustain smooth market functioning.
In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate, the release added.