The Federal Reserve opted Wednesday to keep interest rates at the current level of near zero, until the economy is “in a healthy place,” according to a statement released Wednesday afternoon.
Amid historic unemployment and an economy paralyzed by the coronavirus, the central bank said it “expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
“This is the biggest economic shock in living memory,” Federal Reserve Chairman Jerome Powell said at a press conference following the conclusion of the two-day monetary policy meeting of the Federal Open Market Committee.
“It is a long road,” Powell said, “but we do see a full recovery over time.”
The FOMC, which voted unanimously to keep the rate unchanged, also released economic projections that indicate a focus on longer-term recovery, rather than any quick fix, Powell said.
The central bank forecast a 6.5 percent drop in gross domestic product for 2020, with 3.5 percent growth by 2022.
“The extent of the downturn remains extraordinarily uncertain,” Powell said, adding that the fiscal and monetary response has been “large, forceful and very quick.” While stimulus action such as the Paycheck Protection Program did experience challenges in its implementation, he said the program was nonetheless “innovative.”
Powell also addressed the recent social justice protests, saying there is “no place at the Federal Reserve for racism, and there should be no place for it in our society.”
He said it was “heartbreaking” to see that gains in black employment had been obliterated by the coronavirus, and added that although the Fed “doesn’t target different groups,” policy is designed to effect change for all Americans.
“The work of the Fed touches communities and families and businesses across the country,” Powell said.
While the May unemployment report, which showed a gain of 2.5 million jobs, was a “welcome surprise,” there is still a long road ahead, Powell said.
While the economy is gradually reopening and jobs are slowly returning, the National Bureau of Economic Research declared on Tuesday that the U.S. is officially in a recession, ending 128 months of economic expansion, the longest such stretch on record.
”My assumption is that there will be a significant chunk, well into the millions of people who don’t get to go back to their old jobs and there may not be a job in that industry for them for some time,” Powell said of the 44 million workers who have filed for initial unemployment benefits over the last 11 weeks. Labor recovery is swiftest when workers don’t have to switch careers and learn new skills, Powell said.