Fed sees zero rates through 2022, commits to keep buying bonds

Fed sees zero rates through 2022, commits to keep buying bonds

The Fed chief suggested the lack of jobs would be rooted in the reality that companies were unable to survive the pandemic or the role no longer exists in the new world order.

U.S. stocks fluctuated and the dollar slumped as investors assessed the Fed's views on the economy.

The Federal Reserve kept the benchmark United States interest rate at zero, saying it will remain there until a recovery from the crisis triggered by the coronavirus pandemic is underway. Chairman Jerome Powell noted that the coronavirus "poses evolving risks to economic activity".

At the conclusion of its two-day meeting, members of the Fed's policy-setting Federal Open Markets Committee (FOMC) released their economic projections showing they expect the economy to contract by 6.5% this year, with unemployment falling to 9.3% from the current 13.3%.

Officials expect the USA unemployment rate to hit 9.3% this year, dipping to 6.5% in 2021 and falling further to 5.5% in 2022.

Meanwhile, US inflation edge down again in May, but at a slower rate than the month prior as price drops moderated in some sectors, the Labor Department said today.

The National Bureau of Economic Research, the agency that identifies periods of economic growth and contraction, said Monday the USA entered a recession in February, officially bringing to end a record-long expansion.

But the projections are the first issued since December, and offer policymakers' views on how fast employment and economic growth might recover, and an initial steer on how long the federal funds rate will be pinned down.

During the press conference Chair Powell noted the challenges presented by the COVID-19 pandemic and stated that policy decisions will remain flexible in response to the ever changing situation.

"The Fed is not even thinking about raising rates, we will do whatever we can and as long as it takes", Powell said.

Investors had been watching the statement for how accommodative the Fed would continue to keep policy.

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