The Fed – the US central bank – kept the main interest rate in the US in the range of 0-0.25 percent. – stated in the communiqué after the meeting. It added that, according to the FOMC, the US economy has made progress in meeting the mandate of the central bank.
The decision on interest rates was in line with market expectations and was made unanimously. The press release underlines that Fed it aims to “achieve maximum employment and inflation of 2% in the long term”.
Fed decision on interest rates – July 2021
“As inflation has remained below this long-term target, the Committee will aim for inflation moderately above 2% over a period of time, so that inflation averages 2% over time and long-term inflation expectations remain firmly anchored on the level of 2 percent. ” – wrote in the statement.
“The Committee expects to maintain an accommodative monetary policy stance until these results are achieved.” – added.
See also: The end of zero rates is nearing. Economists agree
The Fed indicated that US interest rates would be kept at their current level until labor market conditions met the Fed’s assumptions for full employment and inflation rose to 2%. and will be on track to moderately exceed the 2% mark. for some time.
“The Federal Reserve can use its full range of tools to support the US economy during this difficult time, thereby promoting maximum employment and price stability targets,” the release said.
“When assessing an appropriate monetary policy stance, the Committee will continue to monitor the impact of the incoming information on the economic outlook. (…) The Committee’s assessment will cover a wide range of information, including readings on public health, labor market conditions, inflationary pressures and inflation expectations, and financial and international events “- added.
The press release said the US economy has made progress towards meeting the FOMC’s mandate goals.
“Last December, the Committee indicated that it will continue to increase its holdings of sovereigns by at least $ 80 billion a month and mortgage-backed securities by at least $ 40 billion a month until significant progress is made in achieving maximum employment and price stability. The economy has made progress in meeting these targets since then, and the Committee will continue to evaluate progress at future meetings. These asset purchases are conducive to the smooth running of the market and favorable financial conditions, thus supporting the flow of credit to households and businesses, “it wrote.
The statement stated that inflation increased due to temporary factors.
“With advances in vaccination and strong political support, economic activity and employment rates have continued to improve. The sectors most affected by the pandemic improved but did not fully recover. Inflation increased, largely reflecting temporary factors. The general financial conditions remain accommodative (…) “- stated in the press release.
“The path of economic development still largely depends on the further course of the coronavirus pandemic. Advances in vaccination are likely to continue to reduce the effects of the public health crisis on the economy, but threats to the economic outlook remain,” he added.
The Fed cut interest rates for the last time at its meeting on March 15, 2020., when it was decided to lower the federal funds rate to 0-0.25 percent. The Fed also established an asset purchase program worth US $ 700 billion, of which US $ 500 billion will be spent on government bonds and US $ 200 billion on mortgage-backed debt securities.
The next meeting of the Reserve is scheduled for September 21-22. After the meeting, quarterly macroeconomic forecasts will be presented.
The dollar appreciates against the basket of currencies after the Fed’s decision to 0.33%. to 92.70 points, and the yield of 10-year Treasuries increases by 1 bp to 1.25%.
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