Fed holds interest rates steady near zero, says economy is still well below pre-pandemic levels


The Federal Reserve held short-term borrowing rates near zero in a decision Thursday that characterized the economy as growing but not near where it was before the coronavirus pandemic hit.

As markets widely expected, the Fed kept its benchmark interest rate anchored in a range between 0%-0.25%, where it has been since an emergency cut seven months ago in the early days of the coronavirus pandemic.

There were few language changes in the post-meeting statement from the Federal Open Market Committee, though the panel did note that the economy continues to struggle.

“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the statement said.

The Fed’s decision to hold steady comes amid concerns over the direction of the economy as Covid-19 cases accelerate and public officials contemplate restrictions on activities that could hamper growth.

In the third quarter, U.S. gross domestic product posted its fastest increase ever, rising at a 33.1% annualized pace after contracting 31.4% in the previous period. The economy has recovered 11.4 million of the 22 million jobs lost in March and April, but payroll growth has slowed in recent months and is expected to decelerate to 530,000 in October.

The Fed has sought to use accommodative policy to stimulate growth, though officials have warned in recent months that more needs to be done on the fiscal side.

In the third quarter, U.S. gross domestic product posted its fastest increase ever, rising at a 33.1% annualized pace after contracting 31.4% in the previous period. The economy has recovered 11.4 million of the 22 million jobs lost in March and April, but payroll growth has slowed in recent months and is expected to decelerate to 530,000 in October.

However, Congress and the White House remained locked in negotiations to provide more fiscal help. The election results, if they hold as many market participants expect, likely mean spending on the low side of what has been banded about through various proposals.

The Fed’s decision was unanimous at this meeting, though that wasn’t the case in September, when two members objected to a new approach to inflation that would see the FOMC hold off on rate hikes until inflation was comfortably above the 2% target.

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