The Fed reiterated low interest rates until the economy recovers Directing monetary policy clearly
The Federal Reserve (Fed) disclosed the minutes of the 9-10 June meeting, stating that most Fed directors agree that The Fed should have a more clear explanation for financial markets. About the policy setting guidelines For the market to be more informed that What is causing the Fed to need to keep interest rates near 0% or raise interest rates?
“Most Fed committee views that The Federal Reserve Policy Committee (FOMC) should communicate to the market. “Forward Guidance Signs Regarding Fed Rate Interest Rates And should provide clearer information regarding the purchase of securities of the Ministry of Finance And debt securities with mortgage loans (MBS) as well as providing more information about forecasting economic trends, “the report said.
The meeting report also states that The majority of the Fed committee agreed that Acquisition of assets will help the economy recover from the effects of the covid-19 epidemic. And is also a good tool for keeping the yield curve level. While one Fed committee said that The Fed needs to push for the use of other tools. Which are possible, such as yield curve control, which will help control long-term interest rates
The minutes of the meeting stated that The Fed committee is reviewing the Fed’s commitment to the era of the Great Depression. The Fed will keep interest rates at low levels until they are confident that various conditions Is in line with the Fed’s predictions The goal is to stimulate the economy to recover faster from the recession caused by the outbreak of the Covid-19 virus.
Most Fed officials have signaled that it will support the linking of interest rate policies. Matching with the specific economic data obtained Many Fed members support their commitment to keep interest rates low until the inflation rate increases to 2 percent or above the Fed’s target, but there are some Fed officials that Should link the approach to changing interest rates to specific unemployment rates And there are only a few directors who want to make a commitment to the monetary easing Have a specific end date Like the Fed used to use the guidelines during the year 2012-2013.
While some Fed officials warn that The Fed’s commitment to keeping interest rates at low levels for a long time. May create risks to financial stability
In this meeting The committee also expressed views on economic trends. The majority of Fed committee views that There is a high chance of the second round of the covid-19 virus spread. And also states that There is a risk that fiscal measures to assist households, businesses and local governments. May not be enough. In addition, the Fed committee also predicted that The US economy may face the worst recession since World War II.
In the monetary policy meeting on June 9-10, the past. The Fed committee unanimously resolved to keep the short-term interest rates at 0.00-0.25% and confirm that the Fed will keep the interest rates at that level. Until the US economy recovered from the outbreak of the Covid-19 virus. And achieve the Fed’s goal of fully hiring Including maintaining price stability
Meanwhile, the Fed will continue to increase its bond holdings in accordance with the QE. The Fed will buy US government bonds worth 80 billion dollars / month. And buy mortgage-backed debt securities (MBS) in the amount of $ 40 billion
In addition, the Fed predicted that The US economy will contract by 6.5% this year before a 5% rebound in 2021 and the Federal Reserve keeps interest rates at 0.00-0.25% until 2022.