Fed stresses commitment to low rates for long run
WASHINGTON » The Federal Reserve pledged on Wednesday to keep its low interest rate policies in place even well after the economy has sustained a recovery from the viral pandemic.
The Fed said in a statement after its latest policy meeting that the improvement in the economy and job market has slowed in recent months, particularly in industries affected by the raging pandemic. The officials kept their benchmark short-term rate pegged near zero and said they would keep buying Treasury and mortgage bonds to restrain longer-term borrowing rates and support the economy.
The policymakers also warned that the virus poses risks to the economy and removed phrases from their previous statement that had said the pandemic was
weighing on the economy in the “near term” and that it posed risks “over the medium term.” The removal of these phrases suggests that Fed officials aren’t sure how long the uncertainty will last.
For now, the job market, in particular, is faltering,
with nearly 10 million jobs still lost to the pandemic, which erupted 10 months ago. Hiring has slowed for six straight months, and employers shed jobs in December for the first time since April. The job market has sputtered as the pandemic and colder weather have discouraged Americans from traveling, shopping, dining out or visiting entertainment venues. Retail sales have declined for three straight months.
At a news conference, Chair Jerome Powell was pressed on whether the Fed should respond to the recent speculative surge in the prices of some individual stocks, notably shares of GameStop, and whether that buying frenzy suggested a dangerous bubble in overall stock prices. Powell deflected the questions by saying the Fed’s interest rate policies aren’t well-suited to address speculation in the stock market.
In addition, he said, “if you look at what’s really been driving asset prices in the last couple of months, it isn’t monetary policy. It’s expectations about vaccines and also fiscal policy. Those are the news items that have been driving asset values in recent months.”