'We're not thinking about raising rates. We're not even thinking about thinking about raising rates,' Fed Chair Jerome Powell said
WASHINGTON - The U.S. Federal Reserve on Wednesday signaled it plans years of extraordinary support for an economy facing a torturous slog back from the coronavirus pandemic, with policymakers projecting the economy to shrink 6.5% in 2020 and the unemployment rate to be 9.3% at year’s end.
Powell, acknowledging the nationwide demonstrations in his opening remarks at a news briefing, said it was now the Fed’s single-minded mission to bring the job market back to where it was at the end of last year, with the unemployment rate at a record low 3.5% and wage gains accumulating for some of the very same lower-paid workers in the service sector that have suffered most during the recent collapse.
“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term and poses considerable risks to the economic outlook over the medium term,” the Fed said in its policy statement. This time that debate has disappeared. The Fed’s preferred measure of inflation is expected to be a weak 0.8% this year, compared to the central bank’s goal of 2%, and rising to just 1.7% at the end of 2022.The decision to leave the policy rate unchanged on Wednesday was unanimous. The central bank also began shaping the longer-term measures it will use to keep the recovery as strong as possible.
“Their messaging is we are keeping rates low, but this is going to work, it is going to get us there,” said Bruce Monrad, chairman and portfolio manager at Northeast Investors Trust in Boston. That response included cutting interest rates to near zero in March and making trillions of dollars in credit available to banks, financial firms, and a wide array of companies.
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