The Federal Reserve decided to keep interest rates unchanged after a two-day meeting, citing economic data that indicates an improving but still fragile economic recovery. The decision continues the U.S. central bank’s efforts to sustain the economic recovery even as the coronavirus pandemic has strained the global economy.
The central bank’s policy-making committee voted unanimously to maintain the benchmark federal funds rate at 0.00-0.25 percent, leaving the benchmark rate at its current level since it was set near zero after the coronavirus pandemic shook up global markets in March.
The Fed said that economic activity and employment have continued to recover, but that the pace of progress has moderated in recent months, and warned that the virus has posed “ongoing risks” to the economic recovery. Although the central bank expects the economy to continue expanding, it cautioned that the path of the economic recovery is “highly uncertain and will depend in part on the course of the virus.”
In a sign of its commitment to providing economic stimulus, the Fed also said it would continue to purchase up to $120 billion in Treasury and mortgage-backed securities each month, and that it will reinvest principal payments from those holdings “at least at the current pace” into Treasuries and mortgage backed securities.
The Fed said it expects to keep interest rates at current levels for some time, but that it would adjust its stance as appropriate to support the economic recovery.
The decision comes at a time when consumers are still reluctant to spend and businesses are uncertain about the path of the recovery. It also follows the recent resignation of two members of the policy-making committee, which may make it harder for the Fed to make consensus decisions in the future.
In the meantime, the Fed is closely monitoring economic developments, particularly the virus, and will adjust its policy as appropriate to ensure a sustained economic recovery.