In the statement made by the US Federal Reserve (Fed), it was emphasized that the decision to keep the interest rate constant was taken unanimously and that the Fed is committed to using all its tools to support the US economy in this difficult period.
It was stated in the statement that the new type of coronavirus (Covid-19) epidemic caused great economic and humanitarian difficulties in the USA and around the world, and that the measures taken against the epidemic caused sharp declines in economic activity and increased losses in the labor market.
In the statement, it was stated that the weakening in demand and the decline in oil prices kept inflation at low levels, and that the deterioration in economic activity seriously affected financial conditions.
It was also emphasized that the crisis will create pressure on economic activity, employment and inflation in the short term, and will pose significant risks on the economic outlook in the medium term.
In the statement, it was noted that in line with these developments, the Federal Open Market Committee (FOMC) decided to keep the policy interest rate in the range of 0-0.25 percent.
In the Fed’s statement, it was stated that interest rates are expected to be kept in this range until it is confident that the economy has overcome recent events and is on the path to achieving its goal of maximum employment and price stability.
It was stated that the committee will continue to closely monitor the developments regarding the economic outlook and public health and will continue to use appropriate tools to support the economy.
On the other hand, it was noted that the Fed will continue to purchase Treasury securities and mortgage-backed securities, including residential and commercial, to support the flow of credit to households and businesses.
Finally, it was stated that large amount of overnight and forward repo transactions will continue and it was underlined that the Committee will continue to monitor market conditions closely.
Expectation of an unprecedented contraction in the economy in the second quarter
In his press conference held via teleconference, Fed Chairman Jerome Powell pointed out that the measures to control the Covid-19 epidemic brought the economy to a sudden halt, and said that the impact of the epidemic on the economy would be severe.
Powell pointed out that millions of employees have lost their jobs and stated that the unemployment rate in the country, which was at its lowest level in the last 50 years two months ago, is expected to reach double digits.
Reminding that there were declines in household spending and consumer confidence, Powell stated that hotels, airlines, restaurants, department stores and retailers were negatively affected by the crisis caused by the epidemic, and that there was a sharp decline in the manufacturing sector with the temporary closure of production facilities.
“Economic activity will decline at an unprecedented rate in the second quarter,” Powell said. made his assessment.
Signal to keep interest rates steady
Stating that the depth and duration of the deterioration in the economy are uncertain, Powell stated that the extent of this depends on how quickly the epidemic is brought under control and the policy measures taken by the government to support the recovery.
Powell emphasized that they are determined to use all tools to support the economy in this difficult period and reminded that they reduced the interest rate to zero last month.
“We expect to keep interest rates at this level until we are confident that the economy has recovered from recent events and that we are on track to achieve our goal of maximum employment and price stability,” Fed Chairman Powell said. he said.
Drawing attention to the importance of credit flow in mitigating the damages in the economy and laying the groundwork for recovery, Powell stated that they have taken strong steps towards this end.
“We will continue to use all means aggressively.”
Powell stated that the Fed’s asset purchases helped improve market conditions and said, “We will continue our purchases of treasury and mortgage-backed securities as necessary.” said.
Reminding that they have implemented a number of programs to ensure stability in the financial system and support the credit flow in the economy, Powell underlined that they will continue to use all tools proactively and aggressively to ensure a strong recovery.
Answering questions from members of the press after his speech, Powell answered the question of whether more support would be provided against the economic effects of the Covid-19 epidemic: “I can say that more support will be needed for the economic recovery to be strong.” he replied.
Powell stated that the Fed’s policy stance is where it should be, and that the economy will most likely return to normal soon, and that the current stance will be maintained until we are sure that the economy has started to recover.
Source: https://www.aa.com.tr/tr/ekonomi/fed-faiz-oranini-sabit-tuttu/1823429
