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Fed Keeps Rates on Hold Despite Signs of Improving Economic Recovery

Economic IndicatorsApr 28, 2021 03:12PM ET
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By Yasin Ebrahim

Investing.com – The Federal Reserve left rates unchanged Wednesday, and appears to be in no rush to rein in its accommodative stance even as vaccine rollouts and fiscal stimulus have bolstered the recovery.

The Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25% and maintained its monthly pace of bond buying at $120 billion.

"Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement," the Fed said in a statement.

Despite the improving economic backdrop and faster pace of reopening, the pandemic continues to weigh on the outlook, according to the Fed. "The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain."

In the press conference that followed the policy statement, Fed chairman Jerome Powell continued to signal that the current stand on policy will remain steady for some time.   

"We continue to expect it will be appropriate to maintain the current zero to one quarter percent target range for the federal funds rate until labour market conditions have reached levels consistent with the committee's assessment of maximum employment and inflation has risen to 2%, and is on track to moderately exceed 2% for some time."

Still, market participants remain wary of an unexpected shift in the Fed's policy. Incoming economic data continue to point to a robust recovery as inflation steps up pace.

The 10-year inflation "breakevens,” a key measure of inflation expectations over the next decade, topped 2.4% on Tuesday, the highest level since April 2013. The PCE index, the Fed's preferred inflation measures, was at 1.6% for February.

The central bank has not turned a blind eye to the increasing pace of inflation, but continues to suggest the post-reopening boom in inflation will be short-lived, or transitory. "Inflation has risen, largely reflecting transitory factors," the Fed said in a statement.

"[W]e are likely to see some upward pressure on prices and but those pressures are likely to be temporary as they are associated with the reopening process and one-time price increases as the economy reopens," Powell said. "It is not likely to lead to persistently higher year over year inflation into the future," he added. 

On the labor market, the Fed chief said the economy is a "long way from full employment" as unemployment remains above pre-pandemic levels. "We've got a long ways to go," Powell added.

Fed Keeps Rates on Hold Despite Signs of Improving Economic Recovery
 

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Comments (28)
John Miller
John Miller Apr 28, 2021 9:49PM ET
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economic recovery? I don't think so. inflation, I know so.
taylor jason
taylor jason Apr 28, 2021 9:49PM ET
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this must be why you don't work for the fed
Co By
Co By Apr 28, 2021 7:15PM ET
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កំពូលយុ
Mike Chen
Mike Chen Apr 28, 2021 7:13PM ET
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I want cheap dollars. Depreciate another 50% and go like Japanese economy with endless stimulus and QE. Build infrastructures improve American life!
Mike Chen
Mike Chen Apr 28, 2021 6:40PM ET
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Fed wants low usd to increase their export and make inport products expensive to create inflation. Sell dollars buy bitcoin!
Bobster Bambino
Bobster Bambino Apr 28, 2021 6:32PM ET
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Incompetent fed raises rates when not indicated and holds at historic lows despite massive inflation and economic recovery.
Gabe Cret
Gabe Cret Apr 28, 2021 6:23PM ET
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Hm, not compelling at all ... half of able body people are home , unemployed receiving that goverment check.
David Frankel
David Frankel Apr 28, 2021 6:20PM ET
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What is full employment, when 50% of the country is not looking for a job.? They've hollowed out every industry besides tech that's designed to eliminate more jobs. Stop the stimmies so that employers aren't in competition with the "wages" the government is providing.
Joel Schwartz
Joel Schwartz Apr 28, 2021 6:20PM ET
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And why should anyone look for a job when they can collect unemployment, YOLO options and make more than their old job thanks to the FED’s reckless monetary policies? It’s all so broken.
Danny Flournoy
Danny Flournoy Apr 28, 2021 5:20PM ET
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me i give it my all . boss man
Xer Zuproc
Xer Zuproc Apr 28, 2021 4:52PM ET
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me via google/amazon accounts.
Eduardo Galdo Franco
Eduardo Galdo Franco Apr 28, 2021 4:48PM ET
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All prices are going up, coincidence? no, this means us dollar is worth less every day
Eduardo Galdo Franco
Eduardo Galdo Franco Apr 28, 2021 4:42PM ET
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All prices are going up... coincidence? no, the us dollar is worth less every day. The fiat system is entering into the final chapter.
Corrupt Fed
Corrupt Fed Apr 28, 2021 4:34PM ET
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Do they not see the rampant inflation? Either they are corrupt or they are incompetent. Abolish the Fed!
Weston Probst
Weston Probst Apr 28, 2021 4:18PM ET
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Ha! 2% inflation when we have already witnesses 20% inflation in the past six months alone
The NCourt
The NCourt Apr 28, 2021 4:03PM ET
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Pray for the USD Longs through the tremendous squeeze.
shahrukhabrar abrar
shahrukhabrar abrar Apr 28, 2021 3:03PM ET
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What about usd inr it will go up or down?
arman hosseinzadeh
arman hosseinzadeh Apr 28, 2021 3:03PM ET
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Friendly advice, dont ask that, learn about forex trading and make your own decision
shahrukhabrar abrar
shahrukhabrar abrar Apr 28, 2021 3:03PM ET
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Okay thankyou
Daniel Nunez
Daniel Nunez Apr 28, 2021 3:03PM ET
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it's going down as long as the fed continues to buy bonds..keep your eye on the US 10 year..and the DXY..when the 10 year rises so will the dollar
shahrukhabrar abrar
shahrukhabrar abrar Apr 28, 2021 3:03PM ET
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Actually I don't have lots of knowledge about it but I have 100 lots of usd inr and my buying price is very high 75.15 and now I don't know it will go up on my rate to rate is there any hope to go up?
ben sc
ben sc Apr 28, 2021 2:59PM ET
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Fed is not touching rates this year. They have said this but also the Fed has to accommodate the admin and when the admin keeps throwing out mutli-trillion and multi-trillion spending packages its becomes impossible to increase rates and fiannce this banana Republic.
peter neal
peter neal Apr 28, 2021 2:58PM ET
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Buy Gold. One way or another it's going up when it all hits the fan. Country is completely messed up and the Dollar is going to ******
vince smith
vince smith Apr 28, 2021 2:52PM ET
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You can never trust the mafia in government, the old lady in front of me at the grocery store mentioned how much prices had gone up. If she can figure it out why can't you Powell. 2% BS
Dave Jones
Dave Jones Apr 28, 2021 2:52PM ET
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jer only cares about the 0.00001%
Mark Jannetty
Mark Jannetty Apr 28, 2021 2:38PM ET
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used cars up 6% month over month, housing ridiculous, gas through the roof, all commodities are up, electric up. in what world is there 2% inflation?
alfred kimson
alfred kimson Apr 28, 2021 2:30PM ET
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usdjpy up or down
David Shepherd Zimba
David Shepherd Zimba Apr 28, 2021 2:30PM ET
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down
Storage Master
Storage Master Apr 28, 2021 2:27PM ET
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2% really? This *******Powel is lying out his ******! Inflation is way over 2 already!! And the fed is still buying bonds?? Wake up people!!
David Shepherd Zimba
David Shepherd Zimba Apr 28, 2021 2:27PM ET
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we going up
Chetan Pankhania
Chetan Pankhania Apr 28, 2021 2:22PM ET
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what does this mean for gold then?
Khalpha Hassan
Khalpha Hassan Apr 28, 2021 2:22PM ET
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Meaning we short usd and buy gold
Dave Lasky
Dave Lasky Apr 28, 2021 2:22PM ET
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if you do see inflation you will want to get out of cash and in to real estate and gold. Money will be worth less but gold and real estate will gain due to inflation. I.e. you need more money to buy both
Chetan Pankhania
Chetan Pankhania Apr 28, 2021 2:22PM ET
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what's does this mean for gold then?
Ashish Khajanchi
Ashish Khajanchi Apr 28, 2021 2:16PM ET
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good for gold..
Ashish Khajanchi
Ashish Khajanchi Apr 28, 2021 2:16PM ET
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good for gold..
 
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