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 the stimulus will continue for years to come

This means that it may take years for interest rates to rise again. The Fed’s “exact plot,” which reflects central bank policymakers’ forecasts, does not show any rate increases this year or 2021. Even in 2022, most politicians believe that rates will remain at current interest rates.

“We don’t think about raising rates – we don’t even think about raising rates,” Fed Chairman Jerome Powell told reporters during a news conference on Wednesday.

The market seemed pleased with the central bank’s update, and stocks jumped briefly. Lower interest rates allow companies to borrow lower interest rates, which is good for the stock market.

The Fed also said it would increase its purchases of government securities and mortgage securities to keep the market running smoothly.

“For now, she’s giving the market what it wants and needs,” said Drew Matus, chief market strategist at MetLife Investment Management.

The Fed cut interest rates to almost zero in March at the start of the coronavirus pandemic. Since then, the central bank has raised billions of dollars to support financial markets, business and state and local governments.

But the central bank, like the federal government, may need to do more to get the economy back on its feet, Powell reiterated at a news conference Wednesday.

Unemployment crisis

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

The central bank acknowledged the “enormous human and economic difficulties” that the coronavirus pandemic has inflicted on people around the world. By December, the Fed expects the unemployment rate to fall to 9.3% from 13.3% in May, but still well over 3.5% since February – a near 50-year low.

Millions of people will not get their old jobs back, “and there may be no jobs for them for a while,” Powell told a news conference.

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

Powell reiterated that some demographic, especially women, blacks and Spanish workers, bear the brunt of the unemployment crisis.

The Fed does not expect economic difficulties to subside soon: It updated its economic forecasts for the year, forecasting a 6.5% decline in gross domestic product, the broadest measure of the economy, in 2020.

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

Part of the uniqueness of the pandemic recession, for example, is that in a way that is human: The economy is artificially shut down to prevent the spread of the virus.

“The road ahead for the economy is highly uncertain and continues to depend heavily on the path of the pandemic,” Powell said.

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