As Economic Recovery Slows, Fed Pledges Full Support At Least Until 2023

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Federal Reserve Chair Jerome Powell has said the Fed is ready to support the economy as a recovery falters.

Andrew Caballero-Reynolds/AFP via Getty Images

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Andrew Caballero-Reynolds/AFP via Getty Images

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The Fed anticipates some improvement in the job market in the coming months. Unemployment is projected to fall to 7.6% by the end of the year, from August’s level of 8.4%. In June, Fed officials thought the jobless rate would still be above 9% at year’s end.

With millions of people still out of work, Fed Chair Jerome Powell has said additional government spending will likely be needed to support families and businesses until the economy more fully recovers.

The central bank itself has pumped trillions of dollars into the financial system to keep credit markets functioning properly. But its novel lending effort to support midsize businesses has gained little traction.

The Fed stressed once again Wednesday that a sustainable recovery is unlikely until the nation is able to get control of the pandemic. New coronavirus infections and deaths have declined since midsummer but remain high compared with most other countries.

Fed’s Jerome Powell: Jobless Rate Better Than Expected; Recovery To Take A Long Time

The rate-setting committee reinforced Wednesday its intent to leave interest rates near zero until the economy returns to full employment and inflation is on track to exceed the Fed’s 2% target for a period of time. That’s consistent with the central bank’s major shift in long-term policy announced last month.

The Fed said at the time that it was adopting the new strategy to allow more people a chance to find work. The new approach would involve allowing the economy to run hotter by tolerating inflation above its 2% target as long as the average rate remained around that level.

Most of the Fed decision-makers expect rates will remain low for at least a few more years, although four members project higher rates in 2023 and one member sees a possibility of higher rates as early as 2022.

But two members of the committee dissented from the timeline altogether. Robert S. Kaplan wanted to maintain more flexibility, while Neel Kashkari preferred to target an inflation target of 2% «on a sustained basis.»

  • industrial production
  • US economy
  • Jerome Powell
  • consumer spending
  • Federal Reserve


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