By Ann Saphir and Howard Schneider
WASHINGTON, Sept 16 (Reuters) – The Federal Reserve kept interest rates near zero on Wednesday and made a bold promise: to leave them at that level until inflation accelerates and is on track to “moderately exceed” its inflation target. 2% “for a while”.
The reversal is part of a shift in monetary policy by the Fed announced last month that aims to offset years of weak inflation and allow the economy to continue creating jobs for as long as possible.
“In effect, what we are saying is that rates will remain very flexible until the recovery of the economy has advanced well,” Fed Chairman Jerome Powell said at a press conference after the release of the US government release. central bank monetary policy and its economic projections.
“That should be a very powerful statement to support economic activity” and bring inflation back to the Fed’s 2% target faster, he said, adding that he believes the guidance should be “durable.”
The recovery, Powell noted, is ongoing, but the pace is expected to slow, which will require continued support from the Federal Reserve and, he said, increased government spending.
The Federal Reserve decision had two dissents, one from a member who thought it was going too far and the other from one who believed otherwise.
The Fed also began a policy shift from stabilizing financial markets to stimulating the economy: The Fed said it would keep bond purchases at least at the current rate of $ 120 billion per month, but that the target of the measure it was partly to ensure “flexible” financial conditions in the future.
The virus “is causing tremendous human and economic hardship,” the Federal Open Market Committee, which sets rates, said in a statement after the end of its last two-day meeting on monetary policy.
The new forecasts showed that interest rates would not change until 2023, with inflation to exceed 2% in that period. The forecast for the contraction of economic activity was reduced to 3.7% from 6.5% in June. Unemployment would fall to 7.6% by the end of the year.
But by promising to keep rates low, the Fed mirrored its new lean toward higher job growth, announced late last month after a nearly two-year review.
(Information by Howard Schneider; Edited in Spanish by Javier López de Lérida)
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