The Federal Reserve left interest rates near zero as expected Wednesday and pledged to keep supporting an economic recovery that appears to be losing steam.
“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world,” the central bank said in a statement. “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.”
Although the economy has climbed partway out of the deep hole dug by the pandemic this spring, there are signs that the rebound is slowing. Job gains have declined in each of last two months. Both retail sales and industrial production had smaller gains in August than the month before.
Federal relief programs — including small business loans and supplemental unemployment benefits — that helped support the recovery earlier this year have largely expired. And Congress has so far been unable to agree on additional relief.
With millions of people still out of work, Fed Chairman Jerome Powell has said additional government spending will likely be needed to support families and businesses until the economy more fully recovers.
The central bank itself has pumped trillions of dollars into the financial system to keep credit markets functioning properly. But its novel lending effort to support mid-sized businesses has gained little traction.
The Fed stressed once again that a sustainable recovery is unlikely until the nation is able to get control of the pandemic. New coronavirus infections and deaths have declined since mid-summer, but remain high compared to most other countries.
This week’s meeting of the Fed’s rate-setting committee is the first since the central bank adopted last month a major new policy that could keep interest rates very low for years.
The Fed said at the time that it was adopting its new strategy in order to allow more people a chance to find work. The new approach would involve allowing the economy to run hotter by tolerating inflation above its 2% target as long as the average rate remained around that level.