Fed Holds Interest Rates Despite Signs of Improving Economic Recovery by Investing.com

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By Yasin Ebrahim Investing.com – The Federal Reserve kept rates unchanged Wednesday and appears in no rush to curb its accommodative stance even as vaccine launches and fiscal stimulus have bolstered the recovery. The Federal Open Market Committee kept it unchanged in the range of 0% to 0.25% and maintained its monthly bond purchase rate at $ 120 billion. “Amid progress on vaccines and strong policy support, economic activity and employment indicators have strengthened. Sectors hardest hit by the pandemic remain weak but have shown improvement,” the Fed said in a statement. . Despite the improving economic environment and the faster pace of reopening, the pandemic continues to weigh on the outlook, according to the Fed. “The current public health crisis continues to weigh on the economy and risks to the economic outlook persist.” At the press conference that followed the policy statement, Fed Chairman Jerome Powell went on to note that the current position on policy will remain stable for some time to come. “We continue to hope that it is appropriate to maintain the current zero to quarter percent target range for the federal funds rate until labor market conditions have reached levels consistent with the committee’s assessment of maximum employment and inflation has risen to 2 %, and is on track to moderately exceed 2% for some time. ” Still, market participants remain wary of an unexpected change in Fed policy. Incoming economic data continues to point to a strong recovery as inflation accelerates. 10-year inflation breakevens, a key measure of inflation expectations over the next decade, surpassed 2.4% on Tuesday, the highest level since April 2013. The PCE index, the preferred inflation measure by the Fed, it stood at 1.6% in February. The central bank has not turned a blind eye to the rising pace of inflation, but continues to suggest that the post-reopen inflation boom will be short-lived or transitory. “Inflation has risen, largely reflecting transitory factors,” the Fed said in a sentence.

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