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Fed Keeps Rates Steady, Signals No Hikes Through 2022

Published 06/10/2020, 02:02 PM
Updated 06/10/2020, 03:01 PM
© Reuters.

By Yasin Ebrahim – The Federal Reserve kept rates unchanged Wednesday, and reiterated its commitment to maintaining easy monetary policy measures for some time.

The Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%. 

The low-rate environment will continue for some time, with policymakers backing rates to remain unchanged through 2022.  The Fed's interest-rate outlook for 2020, 2021 and 2022 was lowered to 0.1% from previous projections in December of 1.6%, 1.9% and 2.1% respectively, the Fed's Summary of Economic Projections showed.

"The committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," the Fed said.

The decision comes as the central bank continues to roll out its lending programs to support the economy, which officially entered a recession in February, data earlier this week showed.

A surprise upturn in U.S. hiring in May, as reported last week, stoked some investor hopes that the economy is shaping up for a speedier recovery, but the Fed slashed its growth forecasts for the years ahead amid uncertainty over the impact from the pandemic. 

The economy is expected to contract by 6.5% in 2020, down from an estimate for 2% growth previously, but return to growth, albeit well below previous estimates, in 2021 and 2022. The Fed expects the economy to grow by 5% next year, and 3.5% in 2022, up from previous estimates of 1.9% and 1.8%, respectively.

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The unemployment rate for the year is expected to come in at 9.3%, up from 3.5% previously, but eventually, fall to 5.5% by 2022.

The pace of inflation, which will continue to be the key driver for future monetary policy, is forecast to cool to a rate of 0.8%, down from 1.9% previously. While core-PCE inflation for 2021 was revised lower to 1.5% from 2%.

The wave of stimulus from the Fed has taken its balance sheet above $7 trillion from about $4 trillion just before the pandemic struck in the U.S. in early March. But the central bank has no plans to rein in quantitative easing, pledging to maintain the current pace of bond purchases over the coming months to support the flow of credit to households and businesses. Purchases over the coming months will be made across a range of debt including Treasuries, agency residential, and commercial mortgage-backed securities.

Latest comments

What the Fed is happening here!?
Gold gold and gold.. buy as much as you can!Stocks? no comments!!!
I give it 2 to 3 weeks maximum and the market will be right back on track for recovery on good news or the fed putting in some more rescue stimulus. If not I will trade the downside with SPY Puts!!!!
Should be 1 or 2 weeks only. Impossible to go 3 weeks downward movement. We are going 3400 EOM.
that's the way it's got to be
no surprise to keep rate low until company can start payback debt
Good and bad at the same time. I'll take the low rates but it doesn't show much faith in a quick recovery.
You must borrow a lot over an extended period of time to think this is a good thing....
Do you trade forex ?
Dow is voletile Down sharply and Recover sharply.
massive sell off
wait for tomorrow and the rest of the month
buy the machine is printing dollars limitless
Steven Rojo, how do you see that sell off? I'm actually waiting for a 10 or 12% correction
Good. No rate hikes. BUY
Wow and Trump said 2021 would be America best year in history....ha ha ha ha ha
Bankrutp for usa in coming
The weather channel is more trustworthy right now than this market.
So true....
So now the market is pricing 2023-2024 boom? this is the most irrational it has ever been.
I did read that they were cutting back daily buying from 75B to 5B somewhere... not sure of the validity of that information or timing of that cut back
China is ****up its insurance policy in the midst of a declining us economy. They are selling us treasuries. With a growing us economy, no problem for the us. But now, a major problem in my opinion. The dollar will fall hard and end being the fiat currency. The government debt will be a major problem to next generation Americans. Thanks to Trump. The only reason the fed isn’t going to negative interest rates is because the py don’t want to angry China who will then sell faster.
Blame the Federal Reserve, not the figurehead who gets all the attention. Same goes for Obama
Finally! Rational heads prevail! Markets now sliding based on Fed’s bleak forecast now that Dr Donny has destroyed the US economy and took out 115,000 Anericans in the process.
Blame the Federal Reserve, not the figurehead who gets all the attention. Don't forget Obama
Don’t worry, I won’t forget that Obama is the one who built this strong economy until Trump totally ruined it for several years to come.....and took out 115,000 Americans (and still counting) in the process.
stop upvoting yourself shill. The Democrats under Bill Clinton helped destroy the American economy just like Bush did nothing to help, just like Obama did nothing to help by reflating the Bubble with money printing and zero rates, just like Trump. END THE FED
They arent changing any policy
Mauricio - its a fed fueled rise
What will be the impact of this Fed meeting on US markets?? Will they Bullish or Bearish??
bullish of course due to printing
If is going to be a long recovery how they said... why the market is going up so fast? Should we sell in hight profits and get back in market again in the 3rd quater when true numbers come out?
You get the point! I think that’s the best we can do
Yes, only money in your pocket is yours. The rest is just pure printing paper.
This has been going on for over a month. When it stops, the market will...
Father: the government /m- its simple - the gov buys bond etf’s through balackrock driving them up and the 60/40 funds and pension funds “have to” rebalance and at the rate the fed is dumping money into bonds thats a lot of rebalancing. In effect, the bond and stock markets have been nationalized for political reasons.
who in their right mind is buying FAANG stocks at these insanely high prices?!?
 theyre the only stocks lifting the nasdaq right now
Newbies - check the number of newly opened accounts at brokers..
it's a good sign of economy recovery
The fed said they couldnt even give a guidance on the future of the economy because everything is so bad hahaha how can anyone interpret that as a good thing?
Put someone like Powell and Powell who are totally ignorant in economy and finance is a tragedy for the future of this country. All our kids will have to beg to pay back the debt created by Powell and Trump.
no if you understand economics.
only children with daddy issues use the word "boomer".
Ok boomer.
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