The Federal Reserve said the economy had “strengthened” but opted to continue providing support while playing down a rise in inflation.
The Federal Reserve on Wednesday left interest rates at rock-bottom and pledged to continue buying government-backed bonds at a steady pace as it tries to support the economy’s recovery from the coronavirus downturn.
At the same time, the central bank painted a sunnier image of the American economy, which is climbing back from a sudden and severe recession caused by state and local lockdowns meant to contain the coronavirus.
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the policy-setting Federal Open Market Committee said in its post-meeting statement. “The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.”
After reaching a low point a year ago, employment is rebounding, consumers are spending and the outlook is increasingly optimistic as vaccines become widespread. Data that will be released on Thursday is expected to show gradual healing in the first three months of the year, which economists think will give way to rapid gains in the second quarter.
Still, Fed officials have signaled that they will keep interest rates low and bond purchases going at the current $120 billion-per-month pace until the recovery is further along. When it comes to government-backed bond buying, a policy meant to make many kinds of borrowing cheap, the Fed has said it would like to see “substantial” further progress before dialing it back. The hurdle for raising rates is even higher: Officials want the economy to return to full employment, achieve 2 percent inflation, and expect inflation to remain higher for some time.
Jerome H. Powell, the Fed Chair, will speak at a webcast news conference at 2:30 p.m.
The economy is clearly improving from the coronavirus shock. Unemployment, which peaked at 14.8 percent last April, has since declined to 6 percent. Retail spending is coming in strong, supported by repeated government stimulus checks. Consumers have amassed a big savings stockpile over months of stay-at-home orders, so there’s reason to expect that things could pick up