Federal Reserve maintains target range for federal funds rate

September 16, 2020

The Federal Reserve announced its decision to hold interest rates steady as economic activity and employment, although improved in recent months, remain well below their levels at the beginning of the year. Despite some uptick in recent months, the coronavirus outbreak has caused widespread human and economic hardship across the United States and around the world. The current climate has led to weaker demand and significantly lower oil prices which according to the Federal Reserve, “are holding down consumer price inflation.” Besides, overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The way forward for the U.S. economy will hinge on course of COVID-19. Economic activity, employment and inflation in the near term continue to be impacted by the on-going health crisis, while posing risks to the economic outlook over the medium term. Against this background, the target for federal fund rate was maintained at 0% – 0.25%, until the labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.

The Federal Reserve also intends to increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering accommodative financial conditions and support the flow of credit to households and businesses. The Committee also reiterated its stance on monitoring the “implications of incoming information for the economic outlook,” including information “related to public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” Additionally, the Open Market Desk will continue to offer term and overnight repurchase agreement operations.


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