WASHINGTON: The Federal Reserve kept interest rates pinned near zero on Wednesday and promised to keep them there until inflation is on track to “moderately exceed” the US central bank’s two per cent inflation target “for some time.” The change in guidance is part of the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

In its policy statement, the Fed also began to pivot from stabilising financial markets to stimulating the economy: the Fed said it would keep its current government bond-buying at least at the current pace of $120 billion per month, but describing the goal as in part to ensure “accommodative” financial conditions in the future.

The coronavirus epidemic continued to weigh on the economy, the Fed said in the statement, released after the end of its latest two-day policy meeting, even as officials upgraded their immediate outlook for the economy.

The virus “is causing tremendous human and economic hardship,” the rate-setting Federal Open Market Committee said. “The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time.”

New forecasts showed interest rates on hold through at least 2023, with inflation never breaching 2pc over that time. Economic growth was upgraded to -3.7pc for this year, from the -6.5pc forecast as of June. Unemployment was seen falling to 7.6pc by the end of the year compared to the 9.3pc forecast as of June.

Published in Dawn, September 17th, 2020