Fed Staying Easy Policy Stance, See Improvement in Even Weakest Sectors

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On Wednesday, the Federal Reserve stayed the course of monetary policy, keeping interest rates stable and continuing its asset purchases while being more optimistic about the economic outlook. In its post-meeting policy statement, the Fed said that “amid progress on vaccines and strong policy support, economic activity and employment indicators have strengthened” over the past six weeks.

Even the sectors most affected by the COVID pandemic have shown improvement, the central bank said. The Fed removed language from its earlier statement that the current health crisis was a “considerable risk” to the economy. The Fed kept its policy interest rate close to zero. Additionally, the Fed said it would continue to buy $ 120 billion in assets to support the economy. The first step for the Fed to withdraw its easy policy would be to slow down or reduce asset purchases. The central bank has guided markets that will only begin to decline when it sees “further substantial progress” on its twin targets of full employment and stable 2% inflation. The Fed statement noted that inflation has risen, but said it is largely due to “transitory factors.” Economists believe the Fed is months away from making any decision to cut its bond buying program. “Everyone should ignore the Fed for the next six to nine months. They won’t do anything. No matter how many people in the markets start freaking out … President Powell has made it very clear: They are going to sit still and let inflation get to them before they do anything, ”said Adam Posen, president of the Peterson Institute for International . Economic Sciences. Markets appear less concerned about the trajectory of expected future interest rate increases, as yields on 10-year Treasuries BX: TMUBMUSD10Y have not moved much in a month. Read: Debt markets are getting the note on the path of likely rate hikes US stocks DJIA, -0.39% SPX, + 0.03% changed shortly after the Fed decision. Powell will carry out a press conference beginning at 2:30 pm ET.