Washington”•The US central bank opened a two-day policy meeting on Tuesday amid signs of waning consumer confidence and with Congress locked in debate over how best to support the economy amid the pandemic.
With interest rates already at zero and the Federal Reserve pumping trillions into the economy through myriad loan programs, policymakers are expected to focus less on direct action as COVID-19 remains a bigger concern.
Coronavirus cases and death tolls are resurging, and many states have reimposed more strict controls, again shutting down some businesses, while tens of millions of jobs have been lost, many permanently.
Jobless workers are also now facing the imminent expiration of extra unemployment benefits unless Congress acts.
Analysts expect the Fed to reinforce a tool used during the global financial crisis: forward guidance.
The policy-setting Federal Open Market Committee (FOMC) is expected make plain that it has no intention to raise the benchmark interest rate until the US is fully back on track and unemployment has fallen significantly from the current 11.1 percent level, while focusing less on inflation.
Amid signs the economy continues to struggle, how much of a boost that declaration will provide is unclear, but economists view it as a minimum step.
“The events of recent weeks have changed my view on forward guidance,” Diane Swonk, chief economist at Grant Thornton, said in an analysis.
“Now is the time to clarify the Fed’s position on forward guidance, which means being explicit about holding interest rates near zero until the economy actually overshoots on its two percent inflation target.”
The FOMC will announce its policy decision Wednesday afternoon, and Fed Chair Jerome Powell will hold a press conference to explain the statement.
Powell has said the central bank can do more to help the economy weather the pandemic storm, and on Tuesday the board announced it was extending through the end of the year lending facilities that had been set to expire around September 30.
The Fed said those programs for firms of all sizes as well as states and municipalities “provide a critical backstop stabilizing and substantially improving market functioning and enhancing the flow of credit to households, businesses and state and local governments.”