The United States Federal Reserve on Wednesday left its monetary policy unchanged by reaffirming its commitment to support the American economy in the face of the damage caused by the coronavirus crisis.
The central bank, which has kept interest rates close to zero as expected, has said it will not hit the fed funds target until the US economy absorbs the shocks recent.
The Fed has said once again that it will use the full range of its instruments to support the world’s leading economy.
The issuing institute further confirmed that it was prepared to maintain its bond purchases “at the current rate”, or about $ 120 billion per month for Treasury bills and securitized mortgages.
Wall Street indexes increased their earnings slightly after the Fed’s statement released after two days of its monetary policy committee (FOMC) meeting.
The S&P-500 further increased its advance to pass 1% during a press conference by Fed Chairman Jerome Powell, who called the economic outlook “very uncertain” and said prolonged monetary and fiscal support was needed. to ensure recovery.
However, the reaction was moderate on the yield on US 10-year government bonds, which remained stable at around 0.58%, and on the dollar, which only slightly increased its losses against a benchmark basket to move closer from a two-year low.
ADS THAT MEET EXPECTATIONS
Jerome Powell expressed concern over the recent upsurge in cases of coronavirus contamination in the United States, saying it was starting to have an impact on economic activity.
He also asserted that the course of the economy would depend very much on the evolution of the pandemic and the measures taken to contain it, suggesting that the Fed could be led to do more if the health crisis worsened.
The outbreak of the crisis in March led the Fed to reduce the “fed funds” target by 150 basis points and urgently mobilize several trillions of dollars to support the economy and financial markets, which caused its balance sheet to soar.
The press release issued by the central bank on Wednesday and the statements by its president should not change the position of the markets, which expect the central bank to deploy new measures after its next meeting, in September, or during the next month. second semester.
“It’s pretty much what we expected,” commented Stan Shipley, macroeconomic analyst for Evercore SI.
“The important communiqu will be that of September, when they will give elements on the management of expectations”, in other words on the communication by the central bank on the evolution expected from its monetary policy, he added.
(Version franaise Patrick Vignal)
by Ann Saphir and Howard Schneider
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