As we have stated before; The eyes and ears of the markets were at the US Federal Reserve’s (FED) meeting. At the meeting held tonight, it was decided to keep the interest rates constant (0-0.25) and it was decided that the asset purchase program would continue at the same pace.
Who Opposed the Interest Rate?
While the decisions taken out of the meeting were taken by 8 votes to 2; Despite the decision not to change the interest rate, opposing votes came from the states of Dallas and Minnepolis.
In the statement made after this historical meeting, it was emphasized that the path to be followed by the US economy will depend on the development of the coronavirus epidemic and the following statements were made:
“Economic activity and employment have recovered in recent months, but remain well below the levels at the beginning of the year. The path the US economy will follow depends on how the virus will run. The coronavirus will put pressure on the economy both in the short and long term. ”
Considering that the FED cuts interest rates in order to minimize the impact of the economic damage caused by Covid-19; Almost no one was expected to change the interest rate, which it has kept at the same level since 15 March. The Federal Open Market Committee held its last meeting before the upcoming US presidential elections on Wednesday, September 16 (today) at 21:00. Fed Chairman Jerome Powell made the following statements in his press release at 21:30.
What Did FED Chairman Powell Said?
Fed Chairman Jerome Powell stated the following in his press release at 21:30:
“We are strongly committed to achieving maximum employment and price stability targets. FOMC members made significant changes to the policy statement.
Household spending has recovered 75 percent of the decline. The pandemic had a serious impact on inflation. Economic activity has recovered from the levels seen in the second quarter. We are seeing signs of improvement in business investments.
In general, economic activity continues to be well below pre-pandemic levels; The path to follow continues to be uncertain.
Weak demand in sectors affected by the pandemic has pulled consumer prices down and inflation is below the Fed’s target. The outlook for the economy is extraordinarily uncertain. A full recovery in the economy is unlikely until people believe it is safe to do something. The path to follow will also depend on the policy decisions made by all branches of government.
We Cannot Reach 2% Target in 1 Month in Inflation
We continue our commitment to use all the tools we have. The Fed aims for inflation to be moderately above the 2 percent target for a while. The Fed is ready to adjust its monetary policy stance appropriately should risks develop to hurt its targets. […] We cannot reach the 2% target in inflation within 1 month. It is our expectation that it will average 2 percent over time.
The emergency vehicles we have implemented will go back to their boxes when the crisis is over. The financial steps taken so far have created significant differences. Direct financial support may be needed, and it may take some time for economic activity to return to pre-pandemic. Both monetary and fiscal policy support may need to continue to achieve full recovery. ”
Policymakers expect the Fed to take some time to reach the 2 percent inflation target.