The Federal Reserve said Wednesday that it will keep buying bonds to maintain low borrowing rates and support a US economy mired in a deep recession with high unemployment. And it said nearly all its policymakers foresee no rate hikes through 2022. The Fed has cut its benchmark short-term rate to near zero. Keeping its rate ultra-low for more than two more years could make it easier for consumers and businesses to borrow and spend enough to sustain an economy depressed by still-widespread business shutdowns. The Dow Jones and S&P 500 indexes saw modest rises after the move was announced, erasing losses from trading earlier Wednesday, CNBC reports.
The central bank noted that the pandemic has caused a sharp fall in economic activity and a surge in job losses. Fed officials estimate that the economy will shrink 6.5% this year, in line with other forecasts, before expanding 5% in 2021. They expect that the unemployment rate will be at 9.3% by the end of this year. The rate is now 13.3%. The Fed also specified that it will buy $80 billion of Treasury securities a month and $40 billion in mortgage-backed securities. At a virtual news conference Wednesday afternoon, Chairman Jerome Powell is expected to drive home the message that the economy remains in need of extraordinary help despite recent glimmers of a possible recovery, including a surprisingly good jobs report last week, the AP reports.
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