Federal Reserve to keep rate at zero amid coronavirus pandemic damage
- Central bank’s policy-setting committee projects US economy to contract by 6.5 per cent this year
- Key rate to stay the same through 2022 at least, before edging back up near 2.5 per cent over longer term
With the economy still reeling from the damage inflicted by the coronavirus pandemic, the Federal Reserve confirmed on Wednesday it will keep the benchmark interest rate at zero until the recovery is under way.
At the conclusion of its two-day meeting, members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) released economic projections showing they expect the economy to contract by 6.5 per cent this year, while unemployment falls to 9.3 per cent from its current 13.3 per cent.
“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” the FOMC statement said.
“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the central bank warned.
As a result, the FOMC will keep the key rate at zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”.