US Federal Reserve maintains main interest rate close to 0 | Amid electoral uncertainty, US Federal Reserve maintains main interest rate close to 0%

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The Fed said it would use all its tools to support the economy in this challenging time of the coronavirus epidemic.

  • The US central bank decided to keep the target range of the Federal Fund Rate at 0-0.25 percent.
  • The Fed also decided to continue with the $ 120 billion asset purchase program at the same pace.

The Federal Reserve (Fed) maintained its main interest rate at a record low of nearly zero (0) percent amidst electoral uncertainty in the US and a new surge of coronavirus cases. The Fed also did not change its level of asset purchases to maintain cash in the market. After a two-day policy meeting on Thursday, the Fed said in its statement that economic activity and employment recovery continue, but is well below the level seen earlier this year. The Fed also said that the US economy is still largely dependent on the state of the coronavirus epidemic.

The US central bank decided to keep the target range of 0–0.25 percent of the federal fund rate. The Fed also decided to continue the current program of $ 120 billion of asset purchases per month at a similar pace. The Fed said it would use all its tools to support the economy in this challenging time.

The Fed said the economy needs more financial and monetary policy support

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Fed Chairman Jerome Powell said that the complete economic recovery will not come until people are confident that they will be safe if they are fully involved in economic activity. He said more financial and monetary policy support is needed to take the economy back to pre-epidemic levels. On Thursday, more than 1 lakh cases of coronavirus were recorded in the US, which is the global record for any single day.

Fed is the only support for relief amidst electoral uncertainty

Joseph Bruselles, chief economist at accounting and consulting company RSM US LLP, said that given the uncertainty of the election, any relief for economic recovery can only be expected from the Fed. Voting for the presidential election in the US has been held on November 3. Democratic Party candidate Joe Biden is leading, but Republican President Donald Trump’s position is also not weak.

The Fed buys $ 80 billion of US Treasury and $ 40 billion of agency mortgage-backed securities every month

Fed Chairman Powell said after the policy meeting that the Fed buys $ 80 billion of US Treasury and $ 40 billion of agency mortgage-backed securities every month under a $ 120 billion monthly asset purchase program. He said that we will keep an eye on the situation and keep analyzing how we can achieve our target of maximum employment and inflation control through asset purchase. Along with this, our focus will also be on achieving market functioning and financial stability.

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