Federal Reserve, unchanged policies to support the U.S.

The Federal Reserve leaves its economic policies unchanged (or almost unchanged) and therefore continues to purchase securities while interest rates remain between 0-0.25%.

The Fed will continue this policy until economic conditions in the United States improve.

In the official statement, it is in fact specified:

„The Committee has decided to maintain the target range for the federal funds rate of 0 to 1/4 percent and expects that it is appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.“

In addition, the Federal Reserve is counting on buying as much as 80 billion a month of government securities and securities from government-guaranteed agencies up to 40 billion a month. That is until:

„further substantial progress is made toward achieving the goals of maximum employment and price stability.“

In fact, this policy aims to favor the smooth functioning of the market and accommodating financial conditions, supporting the flow of credit to families and businesses.

These choices follow those already announced a week ago by the ECB. The European Central Bank in fact announced that it will continue to purchase government bonds as per the PEPP program, which will continue until March 2022. Interest rates also remain firm at zero.

Federal Reserve and ECB stimuli to tackle Covid

The world’s economies are grappling with the second Coronavirus wave. This is why central banks are deploying rather expansive measures to give the economic system a chance to breathe while ensuring liquidity injections.

The arrival of the Covid vaccine, with the first doses already administered in Great Britain and the United States, is raising hopes that the epidemic has reached its final stage. However, the economic consequences will still last a long time and will probably have to face a dreaded „third wave“ expected after Christmas.

The Federal Reserve and the ECB will again be called upon to support the USA and Europe with all the instruments at their disposal.