US Fed keeps interest rates near zero as recovery picks up

The US Federal Reserve on Wednesday kept its benchmark interest rates unchanged at the record-low level of near zero, as economic recovery gathers momentum on Covid-19 vaccination progress and strong fiscal support.

“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in a statement after concluding its two-day policy meeting, Xinhua reported.

“The sectors most adversely affected by the pandemic remain weak but have shown improvement,” the Fed said, adding the ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.

The central bank pledged to continue its asset purchase program at least at the current pace of $120 billion per month until the economic recovery makes “substantial further progress”.

The Fed also acknowledged that U.S. inflation had risen, but reiterated this “largely” reflected “transitory factors”.

“Fed sticks to the script and makes case that the increase in inflation is transitory. Fed implies coming changes to its summary of economic projections by stating economic activity and employment has strengthened,” said Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP.

While the recovery has progressed more quickly than generally expected, “it remains uneven and far from complete”, Fed Chairman Jerome Powell said at a virtual press conference Wednesday afternoon.

“For the economy as a whole, payroll employment is 8.4 million below its pre-pandemic level. The unemployment rate remained elevated at 6 percent in March, and this figure understates the shortfall in employment,” he said.