(ConservativePeak.com)- The Federal Reserve is pledging that it will continue to support the economy as long as it can.
The Fed kept interest rates at near zero on Wednesday as the economic recovery appears to be slowing down. Most of the members of the rate-setting committee also said they expect to keep interest rates near that level through 2023 at least in an attempt to help the country dig out of the recession caused by the coronavirus pandemic.
In a statement, the Fed said:
“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. The ongoing public health crisis will continue to weigh on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
The economy has somewhat recovered from the huge losses it experienced at the outset of the pandemic. But there are signs that the full rebound is slowing down. For each of the last two months, job gains have declined. August industrial production and retail sales both showed smaller gains than in July.
Part of the reason for this is the expiration of the boost the weekly unemployment benefits and of small business loans. Without an agreement from Congress and the White House on a new stimulus package, that money has dried up.
Jerome Powell, the chair of the Federal Reserve, said:
“My sense is that more fiscal support is likely to be needed. Of course, the details of that are for Congress, not for the Fed. But I would say there are still roughly 11 million people still out of work due to the pandemic, and a good part of those people were working in industries that are likely to struggle.”
Powell said the job market is likely to improve a bit in coming months. The Fed projects the unemployment rate to drop to around 7.6% by the end of 2020. That would be a nice improvement from the prediction the Fed issued in June that said the rate would be 9% at the end of the year. In August, the national unemployment rate sat at 8.4%.
In the last six months, the Fed has taken widespread action to try to stimulate the economy, or at least keep it from total collapse. It has set interest rates at near zero to try to keep credit markets functioning well. It has also instituted bond buyback programs.
Thus far, though, it hasn’t had a major impact in the recovery. According to the Fed, a full recovery that is sustainable isn’t likely to happen until the pandemic is under control.
The worst thing for the economy would be a temporary full-scale return to work quickly followed by a return home if new virus outbreaks occur.
As Powell said:
“The more social distancing we can preserve as we go back into the workforce — wearing masks, keeping our distance, that kind of thing — the better we’ll be able to get economic activity back up close to where it was.”