Federal Reserve Remains Unmoved Amid Uncertainty, Says U.S. Economy Continues to Recover

Federal Reserve officials left interest rates and the general stance of monetary policy unchanged near zero at their November meeting on Wednesday, noting the economy is recovering but still lags below pre-pandemic levels.

“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year.,” the Fed said in a statement issued after the meeting.

The Fed’s hold-steady policy was widely expected even though stimulus talks collapsed on Capitol Hill, the November elections cast doubt on the idea that a new round of fiscal expansion is coming, and a surge in infections threaten to revive lockdowns and restrictions on economic activity.

The Fed not only left rates unchanged at the range of 0 to 0.25 percent set at the beginning of the coronavirus crisis. The Fed statement was almost identical to the one issued at its last meeting.

“The path of the economy will depend significantly on the course of the virus. 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 Fed said once again.

The Fed noted that inflation remains low and that inflationary pressures are also quite low. It chalked this up to weaker demand and lower oil prices.
Fed officials are charged with maintaining both full employment and stable prices, aim for two percent inflation. In recent years, inflation has consistently run below that target. This year the Fed announced it would aim for an even higher level of inflation so that over time the average would be at the long-term target.

The Fed’s statement gives no sign that the central bank is responding to changes in the political situation or public health condition of the U.S. Hopes for near term stimulus legislation were much higher at the Fed’s last meeting but have now faded. It is unlikely that there will be any significant fiscal expansion between now and the seating of the next Congress. While the Fed could have signalled a more aggressive monetary policy in light of this, perhaps by expanding bond purchases, it chose to make no changes.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” the Fed said.