June 10, 2020
The Federal Reserve reiterated its commitment to using its full range of tools to support the U.S. economy in this challenging time, thereby pursuing its maximum employment and price stability goals. The advent of coronavirus outbreak caused tremendous human and economic hardship across the United States and around the World. The outbreak has resulted in the implementation of numerous measures to protect public health while inducing declines in economic activity and a surge in job losses. The Federal Reserve cites, “weaker demand and significantly lower oil prices are holding down consumer price inflation. Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
In the near term, the Fed sees economic activity, employment, and inflation being affected by the ongoing health crisis, thus posing considerable risks to the economic outlook over the medium term. As a result, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The range is expected to remain until the Committee is confident that the economy has weathered the recent events and is on track to achieve its maximum employment and price stability goals.
The Committee will also continue to monitor the implications of information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the U.S. economy. According to the FOMC, “In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”
The Federal Reserve, over coming months, will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities to support the flow of credit to households and businesses at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. Moreover, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to change its plans as appropriate.
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