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US Federal Reserve welcomes improvement in activity and employment and maintains ultra-low rates

The US Federal Reserve (Fed, central bank) welcomed an improvement in economic activity and employment this Wednesday after the meeting of its monetary policy committee (FOMC), and maintained its ultra-low rates.

“The sectors hardest hit by the pandemic are still weakened but showed improvement,” those responsible for the organization said in a statement.

They also indicated that “inflation increased, mainly due to transitory factors” and kept the reference interest rates between 0% and 0.25%.

“With the progress in vaccination and a strong fiscal stimulus, the economic activity and employment indicators have strengthened,” the FOMC said after two days of meeting.

According to the FOMC, the pandemic is a key factor for the outlook for the economy. The “ongoing health crisis continues to weigh on the economy, and risks persist.”

Last month, the Fed used the term “considerable risks.”

– Inflation rises, rates remain low –

In a context of rising prices, the statement reiterated that the Fed will continue with its stimulus measures until reaching “maximum employment” and inflation of 2% or more “for a certain time.”

Inflation should exceed 2% per year in the United States in 2021 but that figure will not be enough for the Federal Reserve to increase its interest rates, declared the president of the entity, Jerome Powell, at a press conference after the closing of the meeting.

“A temporary hike above 2% this year does not meet the criteria” defined by the institution to consider an interest rate hike, Powell said, adding that the United States is “still far from full employment.”

The Fed will modify its ultra-low interest rates when inflation stabilizes for a time near 2% and the labor market is at its maximum level, he crushed.

In March, inflation measured by the PCE index, which the Fed considers and which will be published on Friday, should reach 0.5% after February’s 0.2%, according to analysts’ forecasts.

The decision to keep the ultra-low rates was taken unanimously.

Low interest rates encourage consumption, taking credit, and investing.

The Fed will continue to buy Treasuries at the rate of 80,000 million dollars a month and securities attached to mortgage debt for 40,000 million a month.

In its statement, the FOMC does not indicate when these purchases of assets that sustain activity could be reduced by influencing long-term rates downwards.


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