Fed to keep providing aid, sees no rate hike through '22

WASHINGTON— Confronted with an economy gripped by recession and high unemployment, the Federal Reserve signaled Wednesday that it expects to keep its key short-term interest rate near zero through 2022.

At the same time, the Fed said it will keep buying about $120 billion in Treasury and mortgage bonds each month to hold low longer-term borrowing rates to try to spur spending and growth.

The Fed' s message Wednesday, in a statement after its latest policy meeting and in a virtual news conference by Chair Jerome Powell, was that it's ready to do more to help support a shaky economy that faces significant uncertainty. Powell acknowledged that he and other Fed policymakers have only a hazy view of how the economy will fare in the coming months, largely because no one knows how quickly businesses may regain their health or resume a normal pace of hiring.

By pegging i ts shortterm rate to zero for the next two-plus years, the Fed is seeking to induce consumers and businesses to spend enough to sustain an economy depressed by the corona virus. Its benchmark rate influences a range of loans, including for homes, autos and credit cards.

“It is clear that the Fed does not anticipate a V-shaped economic recovery and is positioned to move forcefully to support the economy,” said Joe Brusuelas, chief economist at RSM, referring to an economy that snaps back as quickly as it shrank.

Stock prices initially rallied modest ly after the Fed issued its latest policy statement at 2 p.m. Eastern time before most indexes closed in negative territory.

Powell noted that the job market “may have hit bottom” last month, when employers added a surprise 2.5 million jobs, according to a government report last Friday.