FOMC: Economy Path Depends on COVID-19

The United States Federal Reserve announced on Wednesday that the Federal Open Market Committee (FOMC) has decided to maintain the target range for the federal funds rate at 0% to 0.25%.

The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on required and excess reserve balances at 0.10%, effective July 30, 2020.

As expected, the monetary policy statement noted that FOMC expects to maintain this target range until it is confident that the economy has recovered from the impacts of the COVID-19 crisis and is on track to achieve its maximum employment and price stability goals.

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.”

“The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum employment and price stability goals.”

Furthermore, the statement noted that weaker demand and significantly lower oil prices are holding down consumer price inflation.

“Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses.”

The statement further indicated that the path of the economy will significantly depend on how the pandemic develops.

“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.”

FOMC said it will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and that it could change its plans or use its tools and act as appropriate to support the economy.

As for the inflation target, the committee said that it will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2% inflation objective.

In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations.