The US Federal Reserve says it will leave near-zero interest rates unchanged and projected no rate increases until the end of 2022 as the chairman sees an “extraordinarily uncertain” pace of economic recovery.
“The extent of the downturn and the pace of recovery remain extraordinarily uncertain and will depend in large part on our success in containing the virus,” Federal Reserve Chairman Jerome Powell said in a press conference.
“A full recovery is unlikely to occur until people are confident that it is safe to re-engage in a broad range of activities,” he added.
The 17 members of the Federal Open Market Committee (FOMC), which determines interest rates, all sided with maintaining current interest rates until the end of 2021, while two members projected increases in 2022.
Central banks typically keep interest rates low to encourage spending and economic growth and raise interest rates to prevent inflation and other fiscal maladies.
Meanwhile, unemployment is projected to average 9.3 per cent in 2020, dropping from the current rate of 13.3 per cent.
Unemployment is expected to fall further to 6.5 per cent in 2021 and 5.5 per cent in 2022.
The FOMC expects the economy to contract by 6.5 per cent in 2020 and rebound by 5 per cent in 2021.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Federal Reserve said in a statement.
“In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to (0.25) per cent,” the statement added.
The central bank signalled continued support for a post-pandemic economic recovery saying it will use the “full range of tools” to promote maximum employment and price stability.
During a press conference Powell said the Fed will intervene to boost the economy for “as long as it takes”.