The Federal Reserve left its overnight lending rate unchanged on Wednesday at the end of its last meeting before the Nov. 3 presidential election and said it expects to keep it near zero for more than a year.
In a statement released Wednesday, all 17 members of the Federal Open Market Committee said they expect to keep the central bank’s benchmark rate near zero at least through next year, and 13 estimated it would stay there through 2023.
That will be a boost for homebuilders taking out business loans, and will keep rates low for home equity loans tied to prime rates, which are benchmarked to the Fed rate.
The committee also reiterated its commitment to purchase mortgage-backed securities and Treasuries to support the flow of credit. Fed purchases have helped to drive mortgage rates to the lowest level on record by boosting competition for the bonds, which compresses yields.
“Over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses,” the FOMC said in its statement.
In the first meeting since last month’s overhaul to its inflation policy, the committee provided more specifics.
“The committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well-anchored at 2%,” the statement said. “The committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.”
In a press conference following the release of the FOMC statement, Fed Chairman Jerome Powell said more stimulus is needed from Congress to help an economy struggling with the COVID-19 pandemic.
“My sense is that more fiscal support is likely to be needed,” Powell said. “Of course, the details of that are for Congress, not for the Fed. But I would just say there are roughly 11 million people still out of work due to the pandemic and good part of those people were working in industries that are likely to struggle. Those people may need additional support as they try to find their way through what will be a difficult time for them.”