Fed will keep interest rates near zero until 2023

The United States Federal Reserve announced Wednesday that it will continue to keep interest rates near zero until at least 2023, as part of its efforts to accelerate the economic growth and reduce the unemployment rate.

The central bank said it will also try to bring the inflation above 2% per year. The Fed left its short-term benchmark rate unchanged, near zero, where it has been since the pandemic intensified in March.

The Fed benchmark rate influences borrowing costs for home buyers, credit card users and businesses. The bank’s board of directors hopes that an extended period of low rates will encourage greater use of credit and more spending, although its new policy also carries the risk of inflating stocks or causing other bubbles in the market. financial market.

The Fed’s steps occur with certain improvements in the economy as a background, although it is still weak, with a drop in hiring and an unemployment rate of 8.4%.

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The central bank statement says that as inflation has fallen below its 2% target in recent years, it will seek “now to achieve inflation moderately above 2% for some time.” He also said that he will keep rates near zero “until inflation has risen to 2% and is on track to moderately exceed 2% for a while.”

The change reflects growing concern at the Fed that in recessions, inflation often falls well below 2%, but does not necessarily reach 2% when the economy expands. Over time, that means average inflation falls more relative to the target.

La Fed You prefer a little inflation because it gives you more leeway to cut or raise interest rates in the short term.

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