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Financial Services Law Insights and Observations

Fed will maintain federal funds rates due to Covid-19 effects

Federal Issues Covid-19 FOMC Federal Reserve

Federal Issues

On December 16, the Federal Reserve Board stated it intends to keep the target range for the federal funds rate at zero to 0.25 percent until the unemployment rate lowers and inflation has risen to two percent steadily. While the Board notes that “[o]verall financial conditions remain accommodative,” and “[e]conomic activity and employment have continued to recover,” the Covid-19 pandemic has still caused tremendous economic hardship that has left overall economic levels “well below their levels at the beginning of the year.” According to the Board, the Federal Open Market Committee (FOMC) is seeking to achieve maximum employment and inflation at the rate of two percent over the longer run before adjusting the current monetary policy. Additionally, the Board notes that it will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month. FOMC will monitor the economic outlook and is prepared “to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

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