Fed Pledges Asset Purchases to Achieve Recovery

The United States Federal Reserve vowed in its last policy statement of 2020 to support the economy until it recovers from the Coronavirus crisis.

The Fed is set to continue to buy at least $120 billion of bonds each month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.

“These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses,” according to the Federal Open Market Committee (FOMC) statement on Wednesday.

The purchases will be in at least $80 billion of Treasury securities and $40 billion in mortgage securities.

The FOMC seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.

“With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.”

Following the meeting, the Fed chair, Jerome Powell, said in a press conference, “these measures will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.”

“Our guidance is outcome-based and is tied to progress toward reaching our employment and inflation goals. Thus, if progress toward our goals were to slow, the guidance would convey our intention to increase policy accommodation through a lower expected path of the federal funds rate, and a higher expected path of the balance sheet.”   

“Overall, our interest rate and balance-sheet tools are providing powerful support for the economy and will continue to do so.”