The Federal Reserve on Wednesday repeated a pledge to use its "full range of tools" to support the US economy and keep interest rates near zero for as long as it takes to recover from the fallout from the coronavirus outbreak, saying the path of the economy will depend significantly on the course of the virus.
"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," US central bank policymakers said in a statement issued at the end of their latest two-day meeting, which was held by videoconference. All members of the Fed's policy-setting committee voted to leave the target range for short-term interest rates at between 0 per cent and 0.25 per cent, where it has been since March 15 when the novel coronavirus was beginning to hit the nation.
"The Committee expects to 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," the statement said. "The path of the economy will depend significantly on the course of the virus." Fed officials had been expected to spend some of their meeting debating whether and how to strengthen their so-called forward guidance, perhaps by promising there would be no changes to interest rates until the unemployment and inflation rates meet explicit benchmarks.
The statement gave no hint of such a change, which many Fed analysts expect won't come until the September policy meeting.
Fed Chair Jerome Powell is scheduled to hold a news conference at 2:30 p.m. EDT (1830 GMT).
The Fed also said it will continue to buy at least $120 billion in US Treasuries and mortgage-backed securities each month to steady financial markets.
The Fed renewed its low-rate vow a day ahead of a government report expected to show a record 34 per cent drop in annualized economic output last quarter, when authorities imposed lockdowns that closed businesses and kept people home in a bid to slow the spread of the coronavirus.
Fed policymakers had hoped those measures would help contain the virus, allowing the economy to bounce back quickly, even as they fretted over the possibility that infections could resurge and blunt the economic recovery.
The US central bank has rolled out nearly a dozen new lending and credit programs to fight the economic fallout from the epidemic. But the immediate outlook hinges largely on where infections go from here and how much more fiscal support lawmakers deliver in the meantime.
Since their last policy meeting in June, the epidemic has intensified, with an average of around 65,000 new cases detected each day, about three times the pace of new infections in mid-June. Deaths from Covid-19, the respiratory illness caused by the virus, are also on the rise.
That's prompted governors from California to Florida to impose new economic restrictions.
Job growth, which had been unexpectedly strong in May and June, now appears to be slowing. Consumer confidence has taken a hit.
Meanwhile government aid that kept millions of unemployed Americans spending will drop sharply at the end of this week unless Congress agrees on a new relief package. Republicans are split over whether to support $1 trillion in new spending, and
Democrats want a figure closer to the $3 trillion Congress has already committed to fight the crisis.
Small businesses, a mainstay of the world's largest economy, are also increasingly facing a breaking point as government grants run dry and payments come due.