(Washington Insider Magazine) -Even as the virus threatens, the United States Feds have hinted at its intention to withdraw economic support. The central bank also stated it is making progress toward its long-term aim of achieving maximum employment and averaging 2 percent inflation.
The Federal Reserve hinted on Wednesday, Sept. 22 that it will begin removing support for the US economy later this year, despite policymakers becoming increasingly gloomy about the outlook for growth and job creation as the resurging Coronavirus weighs on the country.
Half the Fed’s 18 officials have penciled in the prospect of an interest rate rise next year, indicating they believe the economy will be robust enough for the central bank to begin withdrawing its enormous assistance more forcefully. During their two-day meeting this week, they kept interest rates steady, according to a recent report.
The Fed’s policymaking committee stated in its post-meeting statement the increase of Covid cases has delayed the recovery, and members predict the economy would grow 5.9 percent in 2021. This is lower than members’ forecast in June of seven percent.
The central bank stated it is making progress toward its long-term aim of achieving maximum employment and averaging 2 percent inflation. As a result, authorities may begin to reduce their monthly purchases of US government debt and mortgage-backed securities in November or December of this year.
These asset purchases, which average $120 billion each month, are designed to boost the central bank’s attempts to keep borrowing costs low while the economy recovers.
The economy has made progress toward these objectives, according to the Fed statement. If development is as expected, the Committee believes that a slowing in the pace of asset purchases may be needed soon.
The Fed meeting came amid jitters in the stock market over the past few weeks as investors worriedly eyed legislative drama in Washington, where the government may run out of funding by the end of the month, and the debt ceiling needs to be raised over the next few weeks to avoid defaulting on bills already incurred by the United States.
The financial troubles of Chinese real estate firm Evergrande have also heightened market concerns, as investors try to determine how large a ripple effect there might affect the U.S.