Fed keeps rate near zero, sees brighter 2021

The Federal Reserve said Wednesday that it will keep buying government bonds until the economy makes substantial progress — a step intended to reassure financial markets and keep long-term borrowing rates low indefinitely. (Dec. 16)

Video Transcript

JEROME POWELL: Recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our September summary of economic projections. Even so, overall, economic activity remains well below its level before the pandemic, and the path ahead remains highly uncertain.

With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0% to 1/4% target range for the federal funds rate until labor market conditions have reached levels consistent with the committee's assessment of maximum employment, and inflation has risen to 2% and is on track to moderately exceed 2% for some time. Looking ahead, FOMC participants project the unemployment rate to continue to decline. The median projection is 5% at the end of next year and moves below 4% by 2023.

We have emphasized throughout the pandemic the outlook for the economy is extraordinarily uncertain and will depend in large part on the course of the virus. Recent news on vaccines has been very positive. However, significant challenges and uncertainties remain with regard to the timing, production, and distribution of vaccines, as well as their efficacy across different groups. A full economic recovery is unlikely until people are confident that it is safe to engage-- re-engage in a broad range of activities.