Fed says US economic recovery depends on virus

WASHINGTON: The US Federal Reserve on Wednesday stressed that the course of the coronavirus pandemic will be critical to the economic recovery.

With the US case count on the rise and recent indicators showing the tentative rebound may be stalling, the policy-setting Federal Open Market Committee (FOMC) held the benchmark lending rate at zero as expected.

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” the committee said in its statement.

“The path of the economy will depend significantly on the course of the virus,” which “poses considerable risks to the economic outlook.”

The FOMC repeated its intention to hold rates near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

But it refrained from making a more explicit commitment to allowing inflation to rise beyond the Fed’s longstanding 2.0% target before tapping the brakes on the stimulus it is providing to the economy.

Many economists are expecting a change in this “forward guidance” but few thought it might happen before September given the growing uncertainty around the economic outlook, especially as Congress has not yet agreed on a new emergency spending package.

The Fed also extended a facility to provide US dollars to nine foreign central banks through March 2021 to “ease strains in global dollar funding markets” caused by Covid-19.