The Federal Reserve left interest rates unchanged and may raise them soon

2022-05-26 0 By

Washington, Jan. 26 (Xinhua) –The US Federal Reserve board (FED) kept the target range for the federal funds rate at zero to 0.25% on Thursday and said it would be appropriate to raise the target range for the federal funds rate soon.In a statement at the end of a two-day monetary policy meeting, the Fed said its Federal Open Market Committee decided to hold interest rates steady to achieve its twin goals of maximum employment and price stability.With inflation currently well above 2 percent and the labor market strong, the Committee expects that an increase in the target range for the federal funds rate will be appropriate soon.At the same time, the Fed decided to continue reducing the monthly pace of net asset purchases.Starting in February, the Fed will increase its holdings of Treasury securities by at least $20bn and agency mortgage-backed securities by at least $10bn a month and end its asset purchase programme in March.’Indicators of economic activity and employment continue to strengthen, with strong job growth and a significant decline in the unemployment rate,’ the statement said.Supply-demand imbalances related to COVID-19 and the reopening of the economy continue to lead to higher inflation.Economic development will remain dependent on the outbreak. Progress in vaccination and easing of supply constraints are expected to support continued growth in economic activity and employment and low inflation, but risks to the economic outlook remain, including those from novel coronavirus variants.The Fed also issued guidelines on reducing its balance sheet that day.Members of the Federal Open Market Committee agreed that adjusting the target range for the federal funds rate would be its primary tool for adjusting monetary policy, and that the timing and pace of the reduction would be based on the two objectives of promoting maximum employment and price stability.The committee expects the Fed to begin the process of shrinking its balance sheet after it starts raising interest rates.At a news conference after the meeting, Fed Chairman Jerome Powell said the economy no longer requires’ a sustained high level of monetary policy support, ‘given significant gains in the labor market and inflation well above the Fed’s 2% long-term inflation target.But the outlook for the US economy remains highly uncertain, and monetary policy should remain flexible in setting the appropriate course to respond to a wide range of possible economic outcomes.