Federal Reserve Leaves Rates Near Zero as Economic Recovery Sputters

Mr. Powell acknowledged the unequal brunt of the pandemic on Wednesday, and said that what the Fed can do is focus on fostering a strong labor market.

“What we’re trying to do is create an environment, in the financial markets and in the economy, where those people have the best chance they can have to go back to work to their old job or to a new job,” Mr. Powell said.

While Fed officials’ June economic projections suggested that they expected unemployment to fall below 10 percent by the end of the year, based on the central forecast, policymakers made it clear that conditions were extremely uncertain. The recent surge in infections could temper the more optimistic takes.

The central bank’s policies do seem to be offering support, at least around the edges. House buying has ticked up, fueled by cheap mortgage rates, and the U.S. homeownership rate is now at levels last seen before the 2008 financial crisis.

Key credit markets have calmed down after a disorderly March and April, as has the market for U.S. government debt.

While investors expect the Fed to eventually make a more concrete commitment to maintaining low rates for months or years — by pegging them to the unemployment or inflation rate, or by pledging to keep rates low until a calendar date — Mr. Powell said on Wednesday that conversations about such approaches would continue at future meetings.

He also said the Federal Open Market Committee’s longer-run framework review, which could guide the central bank’s strategies, would be completed in the near future. Some economists took that news to mean that more action is coming at the Fed’s Sept. 15-16 meeting.

“The July F.O.M.C. meeting was expected to be a placeholder event until more important decisions are made at the next meeting in September,” Michael Feroli, the chief U.S. economist at J.P. Morgan, said in a note. “The committee met those expectations.”

Article source: https://www.nytimes.com/2020/07/29/business/economy/federal-reserve-meeting-interest-rates.html