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Thomas StorringDirector – Economics and Statistics
Tel: 902-424-2410Email: thomas.storring@novascotia.ca

September 16, 2020
US MONETARY POLICY

The Federal Reserve maintained the target range for the federal funds rate at 0 to ¼ per cent at its scheduled Federal Open Market Committee (FOMC) meeting statement today. The Committee expects to maintain this target rate until labour market conditions reach levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 per cent and is on track to moderately exceed 2 per cent for a period so that inflation averages 2 per cent over time.

To support the flow of credit to households and businesses and to sustain smooth market functioning, the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace over coming months.

The coronavirus outbreak is causing tremendous human and economic hardship across the world. Although economic activity has picked up in recent months, it remains below pre-COVID levels. 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 3.7 per cent in 2020 followed by growth of 4.0 per cent in 2021, 3.0 per cent in 2022 and 2.5 per cent in 2023.  Longer-run annual growth rates are projected to be around 1.9 per cent. Projections for the unemployment rate are 7.6 per cent in 2020, 5.5 per cent in 2021 and 4.6 per cent in 2022. Inflation rate projections are 1.2 per cent in 2020, 1.7 per cent in 2021 and 1.8 per cent in 2022. The median Federal funds rate projection is 0.1 per cent through 2023. The longer-run Federal funds rate is estimated as 2.5 per cent. 

The Committee will continue to monitor the economic development and is prepared to adjust its monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The next scheduled FOCM meeting will be held on November 4/5, 2020.

 

Source: US Federal Reserve



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