Securities purchases continue: Fed does not see any interest rate hikes until 2023

Wednesday December 16, 2020

Security purchases continue
Fed does not see any interest rate hikes until 2023

There is little news at the last meeting of the US Federal Reserve this year. The Fed will continue to fight the economic crisis with securities purchases and an ultra-loose interest rate policy. A change to this course is not in sight for the time being – possibly for years.

The US Federal Reserve (Fed) will not change anything in its ultra-loose interest rate policy in the coming years. Beyond the Corona crisis, it signals ultra-low interest rates. On average, the monetary authorities assume that the key interest rate will remain close to zero until the end of 2023.

They left it in a range of zero to 0.25 percent. At the same time, the monetary authorities around Federal Reserve Chairman Jerome Powell declared at their last interest rate meeting in the pandemic year 2020 that they were determined to use the full range of their instruments to support the economy. They want to maintain the volume of their monthly security purchases of 120 billion dollars until "substantial further progress" has been made on the way to full employment and price stability. Since June, the Fed has been buying government bonds for $ 80 billion and mortgage bonds for $ 40 billion a month

Although the situation on the labor market had recently weakened and future US President Joe Biden spoke of "one of the worst economic and job crises in recent history", most experts had not expected the Fed to change course. The central bank had already reacted to the Corona crisis with drastic measures and made it clear that it initially saw financial policy as having an obligation to provide further economic aid.

The US Federal Reserve had to set course amid a political tussle over further stimulus packages in Congress. Recently, there was increasing evidence that Republicans and Democrats could agree after much back and forth on a $ 900 billion aid package. With the number of corona cases rising, the economic recovery has recently slowed down.