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The Fed meet: Status quo, as of now

Powell: The U.S. economy is at an ‘inflection point’

AlphaStreet

The Fed’s decision of maintaining a status quo on interest rates was largely owing to strong numbers from the Labor department for the month of March. Job growth during the month increased at the fastest pace since the previous summer. Nonfarm payrolls rose by 9,16,000 during the month, and the unemployment rate dipped to 6%, largely owing to economic growth and an aggressive vaccination drive. The central bank confirmed its commitment to continue its monthly purchase of assets of at least $120 billion until the U.S. economy “substantial further progress.”

The Federal Reserve Chairman Jerome Powell said he would like to see a “string of months” with equally strong reports before the central bank’s policymakers even consider a gradual pullback of monetary accommodation. Powell had earlier stated that that “a string of months” meant more than one, giving rise to speculation of chances of a taper in the central bank’s next policy meet in June. Powell elaborated that inflationary pressures stemming from supply bottlenecks “are likely to be temporary as they are associated with the reopening process….You are seeing things in the capital markets that are a bit frothy. That’s a fact,” he said.

The Federal Reserve Bank, in its policy meet on Wednesday, left interest rates unchanged at a near-zero level, and indicated that it would continue its aggressive policy stance till the US economy reflects greater growth.

Powell spoke about the U.S. economy being at an “inflection point”. While hope of the country’s economic recovery gaining pace in the coming months are increasing, Powell maintained that a hurried reopening would result in the continual rise in coronavirus cases. “There really are risks out there. And the principal one just is that we will reopen too quickly, people will too quickly return to their old practices, and we’ll see another spike in cases,” he said.

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