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Summary
- The Fed Reserve is committed to achieving the monetary policy goal that Congress had given, i.e., maximum employment and price stability
- The Federal Reserve has pledged to take every step to sustain the U.S. economic recovery in coming months
- The federal funds rate remains unchanged in the range of 0-0.25 per cent
- The Fed promised that till maximum employment has not been restored and inflation heads above the 2 per cent mark as targeted, it will not consider raising the interest rates
The Federal Reserve has pledged to take every step to sustain the U.S. economic recovery in coming months, which is threatened by the spread of the deadly coronavirus pandemic and the uncertainty being faced over a still undecided presidential election. The loose monetary policy has also been kept intact.
Addressing a press conference on 5 November 2020, the US Federal Reserve Chairman, Jerome Powell said that the Fed Reserve is committed to achieving the monetary policy goal that Congress had given, i.e., maximum employment and price stability. Forceful actions have been taken to provide US with relief and stability since the beginning of the pandemic. It has also been ensured that the recovery could be as strong as possible, and steps are being taken to limit long lasting damage to the economy.
Federal market committee is committed towards supporting the economy in the challenging times. Powell also said that economic activity had continued to recover from its depressed Q2 level. The real GDP rose at an annual rate of 33 per cent in the Q3 2020 and reopening of the economy had led to a rapid rebound in the business activity, according to US government statistics.
The federal funds rate remains unchanged between the rates of 0 to 0.25 per cent, as before. It was also said that Consumer Price Inflation (CPI) has been held down by weaker demand and earlier decline in oil prices. The Fed Reserve would also be buying treasuries and mortgage-backed securities at the same level as before, worth $120 billion per month, coming from $80 billion in treasuries and $40 billion in mortgage-backed securities.
Investors were of the opinion that the plunge in long-dated Treasury yields recently had reduced the urgency for the Fed to make changes in the composition of its bond-buying programme in favour of longer-dated debt. Plans to increase its debt holdings for sustaining the smooth functioning of the market and to promote financial conditions were repeated by the Federal Reserve.
The path of economic recovery and that of the eradication of the pandemic would remain inter-connected, said the bank. The Fed promised that till maximum employment was restored and inflation headed above the 2 per cent mark as targeted, it would not consider raising the interest rates.
Joe Biden, the Democratic presidential candidate was very close to the number of electoral votes needed to win the US presidential elections, results were still awaited with counting of ballots in few key states being tabulated. However, there was no mention of the election by the U.S. central bank in the policy statement it released after the two-day meeting.
Prior to the release of Fed's statement, the stocks in the U.S. were moving up sharply, responding immediately and remaining at a higher level during the day. There was slight change in the yields on U.S. Treasury debt securities, and the dollar traded lower in comparison with major trading partners' currencies.
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