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Fed expects to keep rates low for extended period, points to slow recovery
As the U.S. economy begins to recover from the effects of the coronavirus pandemic, the Federal Open Market Committee (FOMC) Wednesday maintained the federal funds target rate at its current range of 0 to 0.25 percent. The committee indicated it plans to maintain this range until "labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time."
“The FOMC’s September statement, combined with its economic projections, suggest that the median committee member does not expect to raise rates until at least 2024," said NAFCU Chief Economist and Vice President of Research Curt Long. "Although the economic outlook clearly improved since the committee’s June projections, the expectation is still for a long, slow recovery.”
The FOMC also indicated that it will continue to monitor economic activity and is prepared to intervene if risks emerge that could have effects on the committee's goals.
Additionally, the Fed plans to increase its holdings of Treasury securities and agency mortgage-backed securities in efforts to "sustain smooth market functioning and help foster accommodative financial conditions," and support the flow of credit to households and businesses.
Of note, the FOMC acknowledged that overall financial conditions have improved in recent months; however, the committee highlighted that the path of the economy will depend "significantly on the course of the virus."
More insights from the meeting can be found in a new Macro Data Flash report. The FOMC is expected to meet next Nov. 4-5; its tentative meeting schedule for the remainder of 2020 can be viewed here.