Will continue to increase its holdings of securities by at least US$80 billion a month

The Federal Reserve, America’s Central Bank, has decided to keep the target range for its benchmark federal funds interest rate at 0 to 0.25 per cent.

In its latest policy statement yesterday, on bench market interest rates, the Federal Reserve said it expects that the current benchmark rate 0 to 0.25 per cent “will be appropriate to maintain this target range until labour market conditions have reached levels consistent with the committee’s assessments”.

Furthermore, the Federal Reserve says it will continue to increase its holdings of Treasury securities by at least US$80 billion a month and agency mortgage-backed securities by at least US$40 billion per month in order to promote smooth market functioning and accommodative financial conditions.

This, the Federal Reserve states, will facilitate the flow of credit to households and businesses. The Federal Reserve will also continue to monitor the implications of incoming information for the economic outlook and is prepared to adjust the stance on monetary policy if necessary.

Supporting maximum employment and price stability targets

The Federal Reserve declared its commitment to using its entire set of tools to assist the United States economy through the difficult period impacting the world while supporting its maximum employment and price stability targets. America’s central bank notes that economic growth and jobs in the country have moderated in recent months, despite the fact that the COVID-19 pandemic is still wreaking havoc across the world.

Following a moderation in the rate of recovery, indicators of economic development and employment have recently increased, though the sectors most impacted by the pandemic remain poor. Additionally, the Federal Reserve highlights that overall financial conditions remain accommodative partly attributable to the support of policy measures to boost the economy and the flow of credit to U.S. households and businesses.

The Federal Reserve contends that, “the path of the economy will depend significantly on the course of the virus, including progress on vaccinations,” pointing to its long-term aim of maintaining employment and inflation at two per cent. This is being done with the wider aim of keeping monetary policy accommodative until these goals are reached.