The Federal Reserve maintained the target range for the federal funds rate at 0 to 1/4 per cent at its scheduled Federal Open Market Committee (FOMC) meeting statement today. The Committee expects to maintain this target rate until it is confident that the economy is back on track to achieve its maximum employment and price stability goals.

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations.

The coronavirus outbreak is causing tremendous human and economic hardship across the world. The strict containment measures have resulted in sharp declines in economic activity and job losses. Weaker consumer demand and lower oil prices are holding down consumer price inflation. While financial conditions have improved reflecting the policy measures to support the economy, it is expected that COVID-19 pandemic will weigh heavily on economic activity, employment and inflation in the near term.

The Federal Reserve projects real GDP will decline 6.5 per cent in 2020 followed by growth of 5.0 per cent in 2021 and 3.5 per cent in 2022.  Longer-run annual growth rates are projected to be around 1.8 per cent. Projections for the unemployment rate are 9.3 per cent in 2020, 6.5 per cent in 2021 and 5.5 per cent in 2022. Inflation rate projections are 0.8 per cent in 2020, 1.6 per cent in 2021 and 1.7 per cent in 2022. The median Federal funds rate projection is 0.1 per cent through 2022.

Source: US Federal Reserve