Fed keeps near-zero rates fixed

Powell: Recovery slowed by surge

WASHINGTON — The Federal Reserve left interest rates near zero Wednesday and pledged to keep supporting the U.S. economy as the pandemic continues to depress economic growth and sideline millions of workers.

“The path of the economy will depend significantly on the course of the virus,” the central bank said in its post-meeting statement, which reiterated that the Fed will keep low rates in place “until it is confident that the economy has weathered recent events.”

Jerome Powell, the Fed chairman, said at a news conference following the meeting that the “pace of recovery looks like it has slowed” since the virus began to spike again in June. While employment ticked up in May and June, “recent labor market indicators point to a slowing in job growth, particularly among smaller businesses,” he said, adding the outlook for consumer spending “may be softening again now.”

“A full recovery,” Powell said at a news conference, “is unlikely until people are confident that it is safe to engage in a broad range of activities.”

The Fed chairman said the central bank remains committed to using all its tools to “provide some relief and stability to ensure that the recovery will be as strong as possible and to limit lasting damage to the economy.”

The Fed has put in place a series of measures since March to help cushion the economic fallout as businesses closed or reduced capacity and shoppers stayed home to control the spread of coronavirus. It has rolled out nine emergency lending programs, which are meant to keep credit flowing to businesses and state and local governments. It is purchasing government-backed bonds to keep markets functioning normally, and it has slashed interest rates to rock bottom to entice borrowing and spending.

But Powell made clear that the Fed, along with Congress, will need to do more to support workers and businesses even once the economy opens more fully.

The unemployment rate, while falling, remains historically high at 11.1%. Initial jobless claims ticked up last week after months of gradual improvement, stoking concerns that the economy might be backsliding. Data suggest that many businesses are beginning to close permanently.

Since the Fed’s previous meeting in June, the pandemic’s threat to the economy has appeared to worsen. The number of laid-off workers applying for unemployment aid has exceeded 1 million for 18 straight weeks. Measures of credit card spending have declined. And companies that track small-business employment say the number of people at work has leveled off, far below pre-pandemic levels, after having risen in May and June.

Republicans and Democrats are negotiating over how to extend federal aid for the pandemic’s many economic victims, including an extra $600 per week in unemployment benefits that expires Friday.

Powell, for his part, made clear that the Fed was ready to keep rates at rock-bottom for the foreseeable future.

“We’re not even thinking about thinking about thinking about raising rates,” he said.