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Economy in Brief

FOMC Leaves Fed Funds Rate Near Zero, Citing Coronavirus Effects
by Tom Moeller  September 16, 2020

The Federal Reserve left the target for the Fed funds rate in a range of 0.00% to 0.25% at today's meeting of the FOMC. The Fed indicated that it will maintain this target range until the economy "is on track to achieve its maximum employment and price stability goals."

Economic growth forecasts are highly uncertain at this time. The Fed stated, "The path of the economy will depend significantly on the course of the virus. 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."

Restating its goals, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent."

To help facilitate a smoothly functioning credit market, the Fed stated "In addition, 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 statement issued following today's meeting can be found here.

Today's action was supported by all but two Committee members.

Current Last 2019 2018 2017 2016
Federal Funds Rate Target 0.0% - 0.25% 0.0% - 0.25% 2.16% 1.83% 1.00% 0.40%

At today's meeting, updated economic projections were developed and extended to 2023.

  2020 (Q4/Q4) 2021 (Q4/Q4) 2022 (Q4/Q4) 2023 (Q4/Q4)
Real GDP -3.7 4.0 3.0 2.5
  June Projection -6.5 5.0 3.5 --
Unemployment Rate 7.6 5.5 4.6 4.0
  June Projection 9.3 6.5 5.5 --
PCE Inflation 1.2 1.7 1.8 2.0
  June Projection 0.8 1.6 1.7 --
Core PCE Inflation 1.5 1.7 1.8 2.0
  June Projection 1.0 1.5 1.7 --
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