WASHINGTON (Reuters) – The U.S. economic recovery remains on track despite a rise in coronavirus infections, the Federal Reserve said on Wednesday in a new policy statement that remained upbeat and flagged ongoing discussions around the eventual withdrawal of monetary policy support. “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” the U.S. central bank said in a statement after the conclusion of its latest two-day policy meeting. “The economy has made progress” toward the labor market gains the Fed says it wants to see before reducing its $120 billion in monthly bond purchases, the statement said. The Fed’s policy decision was unanimous.
Higher inflation remained the result of “transitory factors,” the Fed said, and policymakers expected progress on COVID-19 vaccinations to continue to ease the pandemic’s effect on the economy.
The Fed kept its overnight benchmark interest rate near zero and left unchanged its bond-buying program. The Fed did not release any new economic projections on Wednesday, but Powell will likely be asked how the rise in daily U.S. COVID-19 infections has changed the prospects for a recovery that has advanced quickly but remains incomplete, with employment nearly 7 million jobs short of where it was before the onset of the pandemic in the spring of 2020. Economic growth has been strong enough that the Fed at its June 15-16 policy meeting began discussions about when and how to reduce the monthly purchases of Treasuries and mortgage-backed securities. Economists expect that first step towards ending the Fed’s crisis programs will be taken late this year or early in 2022. Nick Note: when this history is written of this time the question will be why did they not see the inflation they sparked off?