A face mask is seen in front of the New York Stock Exchange (NYSE) on May 26, 2020 at Wall Street in New York City. - Global stock markets climbed Monday, buoyed by the prospect of further easing of coronavirus lockdowns despite sharp increases in case rates in some countries such as Brazil. Over the weekend, US President Donald Trump imposed travel limits on Brazil, now the second worst affected country after the United States, reminding markets that while the coronavirus outlook is better, the crisis is far from over. (Photo by Johannes EISELE / AFP) (Photo by JOHANNES EISELE/AFP via Getty Images)

The Fed says it will continue to provide incentives for years

This means that it may be years before interest rates rise again. The Fed’s “dot plot”, which reflects central bank policy forecasts, does not show an increase in interest rates this year or in 2021. Even in 2022, the majority of politicians believe that interest rates will remain at current interest rates. .

“We’re not thinking about raising interest rates – we’re not even thinking about raising interest rates,” Fed chairman Jerome Powell told reporters during a news conference Wednesday.

The market seemed happy with the announcement of the central bank and the shares rose. Lower interest rates allow companies to borrow at lower interest rates, which is good for the stock market.

The Fed also said it would increase government securities and mortgage securities to keep the market smooth.

“Right now it’s giving the market what it wanted and needed,” said Drew Matus, MetLife Investment Management’s chief marketing officer.

The Fed cut interest rates to near zero in March at the start of the corona pandemic. Since then, the central bank has pledged billions of dollars to support financial markets, businesses and government and local governments.

However, the central bank, as well as the federal government, may need to do more to regain the economy on its feet, Powell reiterated in Wednesday’s press conference.

Unemployment crisis

One of the main goals of the Fed is to strengthen economic conditions that achieve both stable prices and maximum sustainable employment.

The central bank acknowledged the “enormous human and economic hardship” that the corona pandemic has caused to people around the world. By December, the Fed expects the unemployment rate to fall to 9.3% from 13.3% in May, but is still significantly higher than the 3.5% rate since February – almost 50 years lower.

Millions of people will not return to their old jobs, “and there may not be a job for a while,” Powell said during a press conference.

Even by the end of 2022, the unemployment rate is still projected to be 5.5%, much higher than at the beginning of this year.

Powell reiterated that some demographic groups, especially women, blacks and Hispanics, are suffering from the unemployment crisis.

The Fed does not expect financial difficulties to subside any time soon: It has updated its financial forecasts for the year, predicting a 6.5% drop in gross domestic product, the broadest measure of the economy, in 2020.

But Powell dismissed the comparisons to the Great Depression, telling reporters he didn’t think “it’s a good example or a possible outcome for a model of what’s going on here, I really don’t.”

Part of the uniqueness of the pandemic recession, for example, is that it is somehow anthropogenic: The economy has been artificially disabled to prevent the virus from spreading.

“The path to the economy is extremely uncertain and continues to depend significantly on the course of the pandemic,” Powell said.

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