Federal Reserve officials kept monetary policy in a holding pattern, leaving interest rates near zero and making no change to asset purchases, as the final results of U.S. presidential and congressional elections remain uncertain.
“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the Federal Open Market Committee said in a statement Thursday following a two-day meeting, largely repeating language on the economy they’ve employed since July. That marked only a slight tweak from the previous statement saying the economy and jobs had “picked up in recent months.”
The Fed kept the federal funds target rate in a range of zero to 0.25%, where it’s been since March.
In the press conference that followed release of the Fed statement, Fed Chairman stressed that the economy needs more fiscal and monetary policy support, and warned that mounting coronavirus infection rates are a risk.
“I think we’ll have a stronger recovery if we can just get at least some more fiscal support,” Powell told reporters. “The recent rise in new Covid-19 cases, both here in the United States and abroad, is particularly concerning.”
The FOMC said in language identical to the prior statement in September, “The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
While vote counting continues in closely-contested U.S. states, the two major parties could split control of Washington. Democrat Joe Biden is on the brink of capturing the White House from Donald Trump, and his party will retain the House of Representatives. But control of the Senate may hinge on runoff elections in Georgia.
A split outcome would reduce the chances for a big fiscal stimulus package from Congress in the new year, even as the Covid-19 pandemic continues to threaten the economy. That may put more pressure on the Fed to ramp up its bond buying, or at least change the composition of its purchases, in an attempt to lower borrowing costs and further boost the recovery.