In its first meeting of 2021, the Federal Reserve said on Jan. 27 that it would keep interest rates at near-zero in a continued effort to spur economic activity as the U.S. continues its sluggish rollout of COVID-19 vaccines.
In a transcript of his opening remarks, Federal Reserve Chairman Jerome Powell stressed that the path to economic recovery depends mainly on the virus.
“A resurgence in recent months in COVID-19 cases, hospitalizations, and deaths is causing great hardship for millions of Americans and is weighing on economic activity and job creation,” said Powell.
The decision means that the federal funds rate, the interest rate which allows depository institutions to lend to other depository institutions, will remain fastened between 0% and 0.25%. Since the onset of the COVID-19 pandemic, the Fed took its rate to near zero and has held it steady.
“The economy is a long way from our monetary policy and inflation goals, and it’s likely to take some time for substantial further progress to be achieved,” Powell said at a post-meeting news conference.
Powell also stressed that the pandemic and economic downturn has not fallen equally on all Americans.
“The high level of joblessness has been especially severe for lower-wage workers in the service sector, and for African Americans and Hispanics,” he said.
The Federal Open Market Committee (FOMC) will continue to increase its holdings of U.S. Treasury securities by at least $80 billion and mortgage-backed securities by at least $40 billion. The Fed’s quantitative easing efforts have been in full throttle since last March.
Powell added that sufficient vaccine deployment would enable the country to leave the pandemic behind “and return to more normal economic activities.”
“In the meantime, continued observance of social distancing measures and wearing masks will help us reach that goal as soon as possible,” he said.