Fed will continue to pump the economy with money

25 December 2020

2 minute read

On Wednesday, December 16, the FOMC announced that the interest rate would remain at the current level of 0.25%, which was predicted by most analysts.

Once again, all 10 FOMC members voted to keep the rate unchanged. The volumes of asset purchases were also kept at a minimum level of $ 120 billion per month.

Financial stimulus has a positive impact on the economy, but in the medium term, the Fed sees significant risks that the pandemic poses. Loose monetary policy will continue until the targets are achieved.

The Fed expects interest rates to remain unchanged until the end of 2021. One FOMC member is set to raise rates in 2022, another five in 2023.

The US GDP, according to the regulator’s estimates, will shrink by 2.4% in 2020, but will grow by 4.2% in 2021 and 3.2% in 2022.

The main news of the Fed meeting was that the regulator does not intend to reduce the volume of financial stimulus, which was especially feared by the markets.

During a press conference, Fed Chairman Jerome Powell noted the positive from the recent news of the coronavirus vaccine. The purchase of treasury securities will continue.

Buying assets makes monetary policy softer. At the same time, at any time when the economy needs a softer monetary policy, the Fed will be able to implement it, Powell said.