Interest rates will stay near zero for time being

The Federal Reserve said Wednesday that it would maintain its support of the economy, reiterating that a full recovery depends on controlling the spread of the virus.

As Fed policymakers wrapped up their first meeting of the year, there was no indication the central bank would raise interest rates from near-zero or scale back the pace of its asset purchases.

More telling, economists say, will be how Fed Chairman Jerome Powell frames the economic outlook, the role of fiscal policy and the Fed’s ongoing job in aiding the recovery.

In a statement released at the end of this week’s policy meeting, Fed leaders noted the pace of recovery had “moderated in recent months” with weakness concentrated in sectors most harmed by the pandemic, such as hospitality and amusement parks.

“The path of the economy will depend significantly on the course of the virus, including progress on vaccinations,” a statement released by Fed leaders at the conclusion of this week’s policy meeting said. “The ongoing public health crisis continues to weigh on economic activity, employment, and inflation and poses considerable risks to the economic outlook.”

The Fed entered 2021 without one of the key tools of its COVID response: its slate of emergency lending programs launched at the start of the pandemic.

Almost all of those facilities — including loan programs for midsized businesses and local governments — were shut down last month.

Fed leaders wanted to keep those programs in place, saying they were an important backstop to the markets at a time of continued uncertainty. But Steven Mnuchin, President Donald Trump’s treasury secretary, rejected that option when he announced the facilities would shut down at the end of 2020.

Meanwhile, Powell has repeatedly called on Congress to keep aid flowing to struggling households, businesses and local governments. President Joe Biden on Monday said he’s willing to negotiate aspects of his $1.9 trillion coronavirus relief proposal, though he insisted that “time is of the essence.”

Congress passed a $900 billion relief bill in December. Yet Biden and Congressional Democrats are rushing to pass another package that would stave off certain benefits cliffs, including those for unemployment insurance in March.