The Federal Reserve released a series of new forecasts on Wednesday that show the base rate will be close to zero for the coming years, although growth is expected to pick up significantly in the near future.
The Fed cut its base rate – which controls the cost of borrowing across the economy – to the lowest point in March 2020 and decided to keep it there on Wednesday to keep lending cheap and further boost growth. Analysts had expected the steady outcome but were closely watching the central bank’s new economic forecast, which shows officials’ anonymous estimates of how conditions will play out through 2023 and longer.
Mr. Powell and his colleagues realized that they wanted to see a labor market with full employment and inflation a little over 2 percent that is expected to stay there for some time before interest rates rise.
In the forecasts released on Wednesday, there seemed to be a consensus to keep rates very low for a long time. Only seven officials announced rate hikes by the end of 2023, while eleven saw this policy instrument on hold.
The Fed also buys $ 120 billion in bonds every month – $ 80 billion in government bonds plus $ 40 billion in mortgage-backed debt. The criteria for slowing these purchases were less clear.
The Fed’s inflation estimates now suggest that price gains will soar to 2.1 percent by the end of 2023, while unemployment continues to fall and faster.