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Wednesday, November 25, 2020

Policy Makers Say For Low Interest Rates, The US Economy Needs Fiscal Aid

On Wednesday, officials from the Federal Reserve met with top investors and claimed that they will keep the interest rates close to zero. They said that they will help lower the unemployment numbers. They further added that the low interest rates will continue till inflation reaches 2 percent. 

During the Federal Reserve policy meeting, the board decided to revamp the US economy and bring employment level to its full potential. 

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Charles Evans, Chicago Fed President, and Richard Clarida, Fed Vice Chair, made clear that they intend on keeping the interest rates low until the labor market recovers from the devastation blow by the COVID-19 pandemic. They also added that they will keep going till the Federal Reserve target is reached. 

Feds Hope To Reach Their Goal In Four Years

Clarida told media sources that they could even continue to keep the interest rates near zero until they observe 2 percent inflation. He added that this measure is necessary to boost the US economy back to its feet. 

Evans also spoke with media sources and said that they are confident about reaching this goal. He further added that the agency believes that the confirmations will be met by the end of 2023. 

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Eric Rosengren, the Boston Fed president, said that reaching the goal would take longer if the country witnessed a second wave of coronavirus. Reinstating coronavirus related restrictions will lead to slower economy growth. Regardless, the federal reserve won’t increase interest rates until their goal is reached, Rosengren further added. 

Several investors were left disappointed after the officials kept mum in increasing bond purchases. They say it will further lower their stock indices. 

On the issue, Evans told media sources that beefing up their current asset purchase will be premature. He further added that when customers start spending more in the market, the Feds will be in a better position to take action in their bond purchases. 

Back in March, the federal reserve officials decreased the interest rate close to zero. While the lockdown forced everyone to stay inside their homes, the Feds had to take drastic measures to ensure that the IS economy did fall completely and go into recession. 

Lower Interest Rates Might Improve Market Sentiment

Although the US economy is slowly getting back up from the COVID-19 induced slump, there’s still a lot of damage that needs to be repaired. 

Jerome Powell, the Federal Reserve Chairman, recently informed Congress that The US economy needs additional fiscal aid to get back to its pre-COVID shape. 

He added that the US economy needs support from both the federal agents and Congress to recover. 

While everyone is hoping that lower interest rates would help, we also need to keep in mind that the pandemic still continues and no vaccine is in sight yet. 

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