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.
One of the main goals of the Fed is to strengthen economic conditions that achieve both stable prices and maximum sustainable employment.
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.
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.”
“The path to the economy is extremely uncertain and continues to depend significantly on the course of the pandemic,” Powell said.