The Fed says it’ll stay the course with low interest rates even as economy strengthens.
2021-03-17 18:03:01.945 GMT
By Jeanna Smialek
(New York Times) — The Federal Reserve released projections showing its
interest rates holding at near-zero for years, even as economic growth picks
up in the near term.
Federal Reserve officials underscored their resolve to continue supporting the
American economy’s recovery from a bruising pandemic, releasing a fresh set of
projections that showed the central bank’s policy interest rate on hold at
near-zero for years to come even as growth is expected to pick up considerably
in the near term.
The Fed slashed its policy interest rate — which guides borrowing costs
throughout the economy — to rock bottom in March 2020 and chose to keep it
there Wednesday, an effort to keep credit cheap and continue stoking growth.
Analysts had expected the steady outcome, but were closely watching the
central bank’s fresh set of economic projections, which show officials’s
anonymous estimates of how conditions will evolve through 2023 and in the
longer run.
The new release showed that officials have become more optimistic about the
outlook for growth, unemployment, and inflation since their December estimates
came out — but not to the point that they anticipate a wild overheating of the
economy or expect to remove policy support rapidly. Most officials still see
rates at rock-bottom over the next three years, meaning they are not penciling
in a rate increase until at least 2024.
“Following a moderation in the pace of the recovery, indicators of economic
activity and employment have turned up recently, although the sectors most
adversely affected by the pandemic remain weak,” the Fed said in its
post-meeting statement. It reiterated that it is “committed to using its full
range of tools” to bolster growth.
The Fed’s inflation estimates now suggest that price gains will rise to 2.1
percent by the end of 2023, at the same time as unemployment falls further and
more quickly.
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