The US Federal Reserve on September 16 made a bold new promise to keep interest rates at record-low near zero until inflation is on course to overshoot its 2% target. The pledge is aimed at bringing millions of Americans back to jobs. This new guidance indicates that the central bank now expects a steady, years-long recovery. This is also the Fed’s last policy decision ahead of the US presidential election in November.
Fed policymakers now see the economy contracting 3.7% in 2020, less severe than the 6.5% fall they forecast in June. They saw the unemployment rate to fall to 7.6% by the end of the year from 8.4% last month. Falling consumer spending is expected to have recovered by three-quarters.
Fed Chairman Jerome Powell said the recovery had begun and gone well despite the spreading COVID-19. He noted that using masks and social distancing measures helped a large part of the US economy to regain traction lost during the April-June quarter. He also added that the Fed would maintain its accommodative approach for the foreseeable future.
