Fed keeps rates steady, pledges to remain on hold until inflation rises
WASHINGTON (Reuters) - The Federal Reserve kept interest rates pinned near zero on Wednesday and promised to keep them there until inflation is on track to "moderately exceed" the U.S. central bank's 2% inflation target "for some time."
The change in guidance is part of the Fed's monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.
In its policy statement, the Fed also began to pivot from stabilizing financial markets to stimulating the economy: the Fed said it would keep its current government bond-buying at least at the current pace of $120 billion per month, but describing the goal as in part to ensure "accommodative" financial conditions in the future.
The coronavirus epidemic continued to weigh on the economy, the Fed said in the statement, released after the end of its latest two-day policy meeting, even as officials upgraded their immediate outlook for the economy.
The virus "is causing tremendous human and economic hardship," the rate-setting Federal Open Market Committee said. "The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time."
New forecasts showed interest rates on hold through at least 2023, with inflation never breaching 2% over that time. Economic growth was upgraded to -3.7% for this year, from the -6.5% forecast as of June. Unemployment was seen falling to 7.6% by the end of the year compared to the 9.3% forecast as of June.
But in pledging to keep rates low until inflation was moving above the 2% target, to make up for years spent below it, the Fed reflected its new tilt towards stronger job growth, announced late last month after a nearly two-year review.
Fed Chair Jerome Powell is scheduled to hold a virtual news conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the statement.
(Reporting by Howard Schneider; Editing by Paul Simao)
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