The Federal Reserve has no plans to raise interest rates through 2022, officials announced after meeting on Wednesday. Central bankers said they were focused on supporting the economy in the wake of the coronavirus pandemic.
‘We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates,’ Chairman Jerome Powell said. ‘What we’re thinking about is providing support for the economy. We think this is going to take some time.’
The Federal Reserve cut the target range for the overnight funds rate to 0-0.25% in March, as the global economy slowed to a standstill. In April, officials stated that rates would stay low until the economy is on track to reach 2% inflation and unemployment declines.
In addition to its cautious stance on rates, the Fed ramped up open ended asset purchases and set up emergency lending programs for businesses and local governments.
There was one small policy change. The Federal Reserve will maintain the pace at which it buys government debt and mortgage securities, after previously suggesting that it would gradually reduce those purchases. Central bankers could buy $20 billion in Treasuries and $22.5 billion in mortgage securities this week.
On top of its policy announcement, the Federal Reserve also released an economic forecast. The body predicts that GDP will contract by 6.5% this year, then recover by 5.0% in 2021, and 3.5% in 2022. Officials believe that unemployment will fall to 9.3% in 2020, before falling further to 6.5% next year. Headline inflation will slowly climb, from 0.8% in 2020, to 1.6% in 2021, and 1.7% in 2022.
Of course, even the best forecasts are uncertain. The OECD announced yesterday that it expects United States economic growth to slump to -7.3% annually (at best) this year. Earlier this week, the National Bureau of Economic research declared that the economic recovery officially ended in February.