Home / Opinion / Views /  US Fed pledges to support economy through stimulus

The Federal Reserve said it will continue to support the economy through massive monetary stimulus until it sees “substantial further progress" in employment and inflation.

At their final meeting of a tumultuous year, policymakers led by chairman Jerome Powell voted to maintain monthly bond purchases of at least $120 billion, according to a statement Wednesday. Policymakers made no changes to the composition of purchases, declining to shift them toward longer-term maturities.

“The Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals," the Federal Open Market Committee (FOMC) said.

Speaking to reporters on Wednesday, Powell said he expects the economy to perform “strongly" in the second half of 2021 as more and more Americans are vaccinated against the virus . “We can kind of see the light at the end of the tunnel," Powell said. “We’re thinking that this could be another long expansion."

The Fed meeting came as lawmakers on Capitol Hill tried to wrap up an agreement on new stimulus after months of deadlock, with both fiscal and monetary policy poised to help continue cushioning an increasingly shaky economy during the wait for widespread vaccine distribution.

The FOMC said “economic activity and employment have continued to recover but remain well below their levels at the beginning of the year."

The committee unanimously kept the federal funds target rate in a range of zero to 0.25%, where it’s been since March, and a majority of Fed officials continued to forecast that their benchmark lending rate would be held near zero at least through 2023.

The FOMC “expects it will be appropriate to maintain this target range until labour market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time," policy makers said, repeating language from their November statement.

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