September 19, 2020

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Federal Reserve expects interest rates to stay there through 2023

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The Federal Reserve expects to keep interest rates near zero until at least 2023 to help reinvigorate the coronavirus-stricken economy, the central bank announced Wednesday in opting to leave rates unchanged.

The widely expected decision to stand pat on interest rates is in line with the Fed’s recent policy shift. The central bank has said it plans to keep rates near zero for the foreseeable future as it tries to boost inflation above 2% in a bid to prop up the labor market. The Fed’s benchmark rate target is currently set between zero and 0.25%.

In considering rate changes, the Fed said it will “take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

Recovering economy?

While it expects to hold interest rates near zero, the Fed sees the economy recovering much faster than it predicted earlier this year. Fed officials project that the nation’s unemployment rate will fall to 7.6% by year-end and by 4% in 2023.

“The economy has recovered more quickly than generally expected,” Fed Chairman Jerome Powell told reporters Wednesday.

But he added that a full recovery was unlikely until the coronavirus is eradicated. “The outlook for the economy is extraordinarily uncertain and will depend in large part on keeping the virus in check,” Powell said.

More Americans seeking unemployment


Brian Coulton, chief economist with credit rating firm Fitch, described the Fed’s latest interest-rate forecast as “quite dovish” given policymakers’ brighter economic outlook.

New data released Wednesday morning indicate that the economy continues to improve, but that the pace of recovery has slowed. Some 29 million Americans are receiving some form of unemployment assistance, and the U.S. has 11 million fewer jobs today than it did in February.

This is a developing story.

2020-09-16 14:53:00

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