Fed to Stick With Stimulus as Long Road to Economic Recovery Ahead: Fed's Minutes

Fed to Stick With Stimulus as Long Road to Economic Recovery Ahead: Fed's Minutes

Investing.com  | May 21, 2020 02:04

Fed to Stick With Stimulus as Long Road to Economic Recovery Ahead: Fed's Minutes

By Yasin Ebrahim 

Investing.com - Federal Reserve members expressed caution on the prospect of a speedy economic recovery and remained committed to keeping policy accommodative until the economy has weathered the pandemic's impact, according to the minutes of their April meeting out Wednesday.

At the conclusion of its previous meeting on April 29, the FOMC kept its benchmark rate unchanged in a range of 0% to 0.25% and vowed to keep rates lower to ensure that an eventual economic recovery will be robust.

"Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals," the minutes showed.

In a dire assessment of the road to economic recovery, committee members agreed that the impact of the coronavirus would "weigh heavily on growth in the near term, and posed considerable downside risks to the economic outlook over the medium term." Growth is expected to return in the second half of the year, but it is unlikely a full recovery would be made by year-end.  

A few members, meanwhile, floated the idea of yield curve control to support economic growth.

"A few participants also noted that the balance sheet could be used to reinforce the Committee’s forward guidance regarding the path of the federal funds rate through Federal Reserve purchases of Treasury securities on a scale necessary to keep Treasury yields at short to medium-term maturities capped at specified levels for a period of time," the minutes said.

Looking ahead, some Fed members also expressed a need for more clarity on policy, allowing market participants to assess the conditions that may lead to a change of future monetary policy. 

"Some participants commented that the Committee could make its forward guidance for the path for the federal funds rate more explicit. For example, the Committee could adopt outcome-based forward guidance that would specify macroeconomic outcomes—such as a certain level of the unemployment rate or of the inflation rate—that must be achieved before the Committee would consider raising the target range for the federal funds rate. The Committee could also consider date-based forward guidance that would indicate that the target range could be raised only after a specified amount of time had elapsed."

The unwavering conviction from the U.S. central bank to do whatever it takes to support the economy was recently echoed by Fed Chairman Jerome Powell.

Powell told the Senate Banking Committee Tuesday that the Fed will use whatever it can muster to fight the economic impact of Covid-19.

“We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response,” Powell said, according to Bloomberg.

As well as the two emergency rate cuts in March, the Fed has unveiled 10 separate lending programs to boost liquidity and support businesses and consumers.

Related News

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Canada) English (Australia) English (South Africa) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.