SINGAPORE (Apr 30): The US Federal Reserve has voted to keep interest rates unchanged in its policy meeting on Apr 29.
The 17-member committee has maintained the benchmark lending rate at the target range of between 0% and 0.25%, which was set in its emergency rate cut on Mar 15.
The central bank has also pledged to keep rates near zero till unemployment levels improve, and the US’ inflation rate returns to 2%.
“We’re not going to be in any hurry to withdraw the measures or to lift off. We’re going to wait until we’re quite confident that the economy is well on the road to recovery,” Fed Chairman Jerome Powell said at a press conference following the Fed’s committee meeting.
A Bloomberg poll conducted between April 20 -23 shows over half of the 31 economists surveyed are expecting interest rates to remain at status quo, at least till 2023. Another 22% are expecting it to hold till 2020.
The effects of the unprecedented coronavirus pandemic has been dire on the US, with its economy shrinking 4.8% in 1Q20 – its worst decline since the 2009 Global Financial Crisis. The job market has also taken a hit as over 26 million Americans filed for unemployment in the last five weeks.
See : US economy contracts in 1Q2020, initial data shows
But the central bank is bracing itself for a further decline.
“Economic activity will likely drop at an unprecedented rate in the second quarter. Both the depth and duration of the economic downturn are extraordinarily uncertain, and will depend in large part on how quickly the virus is brought under control,” observed Powell.
Aside from monitoring interest rates, the Fed has doled some US$2.3 trillion ($3.3 trillion) in support for payroll protection and lending for small businesses.
Powell is now urging policymakers to deliver more fiscal stimulus to protect the ailing US economy. He cautions the economy will remain weak even after the coronavirus pandemic abates.
He further stressed that “this is not the time” to allow concerns about the size of the federal deficit to hinder the scale of the response.
“I think everyone is suffering here but I think those who are least able to bear it are the ones who are losing their jobs. It is heartbreaking to see all that [being] threatened right now”.
US stocks responded positively to the news with the Dow Jones gaining 2.21% or 532 points to close at 24,633.86 points.
The S&P500 closed 2.66% higher, while the Nasdaq composite gained 3.57% or some 307 points to close at 8,914.71 points.
Meanwhile, the yield on the benchmark 10-year Treasury fell 2 basis points lower to 0.59%.
