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Fed pledges to keep interest rates near zero for years

September 16, 2020. Summarized by summa-bot.

The Federal Reserve committed Wednesday to do more to help the US economic recovery, promising more asset purchases and lower interest rates for even longer than it previously expected.

New York (CNN Business)The Federal Reserve committed Wednesday to do more to help the US economic recovery, promising more asset purchases and lower interest rates for even longer than it previously expected.

The Federal funds rate remained unchanged at zero to a quarter percentage point, and will stay there until America's labor market has recovered "consistent with the Committee's assessments of maximum employment" and the inflation rate has risen to 2%, and is on track to exceed that level for some time.

Given the country is still down 11. 5 million jobs since February and the consumer price inflation rate over the past 12 months stood at 1. 3% last month, this seems like a long way off.

A survey of Fed officials showed the group expects rates to remain at or near zero through 2023 -- a year later than the previous survey conducted in June.

Under the new strategy, the Fed will favor maximizing employment over regulating spikes in inflation.

It still targets 2% inflation, as it has for decades, but it won't hike interest rates quite as quickly in the future to counteract inflation spikes.

The Fed had some optimistic news to report: It updated its economic projections, and the picture seems to have improved.

For example, the central bankers expect a median 7. 6% unemployment rate for 2020, down from the 9. 3% forecast in June.

While most members of the Federal Open Market Committee voted in favor of the decision, there were two dissenters: Dallas Fed President Robert Kaplan thinks the Fed should reconsider rates when its members are confident that the economy has weathered the storm and is on the path higher.

Meanwhile, Minneapolis Fed President Neel Kashkari believes rates should remain at the current, low level until core inflation has reached 2% "on a sustained basis. "

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