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Thursday 17 december 2020

Fed keeps rate near zero and sees brighter economy in 2021

Continued from Front tions and business failures, and could lead investors
and he expressed optimism to force up interest rates
Chair Jerome Powell said about the deal under con- sooner than the Fed would
he and other Fed officials sideration by Congress. prefer.
expect the economy to re- "The case for fiscal poli- In quarterly economic pro-
bound at a healthy pace cy right now is very, very jections that the policy-
next year as viral vaccines strong," Powell said, "and I makers issued Wednesday,
become widely distributed. think that is widely under- they painted a brighter
But the next three to six stood now. It's a very posi- picture for next year. Their
months will likely be pain- tive thing that we may fi- upgrades likely reflect the
ful for the unemployed and nally be getting that." expected impact of new
small businesses as pan- Congressional leaders ap- coronavirus vaccines. The
demic cases spike, Powell pear to be nearing agree- officials now foresee the
said at a news conference. ment on a $900 billion relief economy contracting 2.4%
In a statement and in Pow- package that would pro- this year, less than the 3.7%
ell's answers to reporters, vide extended unemploy- This Feb. 5, 2018, file photo shows the seal of the Board of decline it envisioned in Sep-
the Fed signaled that it's ment benefits, more loans Governors of the United States Federal Reserve System in the tember. For next year, in
prepared to keep rates for small businesses and ground at the Marriner S. Eccles Federal Reserve Board Building anticipation of a rebound,
ultra-low for the long run possibly another round of in Washington. the officials have upgrad-
to help the economy with- stimulus checks for individ- Associated Press ed their growth forecast
stand those threats and ual Americans. stein. continue to buy at least from 4% to 4.2%.
sustain a recovery. "Ongoing fiscal negotia- The Fed's policymakers $80 billion of Treasurys and By the end of 2021, the Fed
Yet Powell also pointedly tions are more important made just one notable $40 billion of mortgage- expects the unemploy-
stressed the need for fur- than anything the Fed did change to the statement backed securities a month ment rate to fall to 5% from
ther rescue aid from Con- today," said Eric Winograd, they issue after each meet- "until substantial further the current 6.7% — lower
gress to ease the impact of U.S. economist at asset ing. On Wednesday, they progress has been made" than the 5.5% rate it had
increased apartment evic- manager AllianceBern- said the central bank will toward the Fed's goals of forecast in September.
maximum employment The Fed's latest policy
and stable prices. statement coincides with
Those purchases are in- an economy that is stum-
tended to hold down bling and might even shrink
longer-term rates, includ- over the winter as the rag-
ing borrowing costs for ing pandemic forces new
mortgages, auto loans and business restrictions and
some business loans. keeps many consumers at
Previously, the Fed had home. Weighing the bleak
said only that the purchas- short-term outlook and the
es would continue "over brighter long-term picture
coming months." The new has complicated the Fed's
guidance suggests that the policymaking as it assesses
bond buys will continue in- how much more stimulus to
definitely. pursue.
"The key message is still that At his news conference,
policy will remain unusually Powell acknowledged that
accommodative — with challenge.
near-zero rates and asset "The case numbers are so
purchases — continuing for high and so widespread
several more years," said across the country ... this
Paul Ashworth, chief U.S. will have the effect of sup-
economist for Capital Eco- pressing activity," he said,
nomics. particularly in-person serv-
Some economists faulted ices such as eating out and
the phrasing as too evasive. traveling.
More precise guidance "At the same time, peo-
might prevent financial ple are getting vaccinat-
markets from anticipating ed, now," he added. "You
an end to the purchases have to think sometime in
before the Fed intends to the middle of next year,
reduce them. you'll see people comfort-
"The Fed's forward guid- able going out and engag-
ance is disappointingly ing in a broader range of
vague," Winograd said, activities."q