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Expect low rates till at least 2023, says Fed

Ng Qi Siang
Ng Qi Siang9/17/2020 03:08 PM GMT+08  • 3 min read
Expect low rates till at least 2023, says Fed
OCBC Chief Economist Mansoor Mohi-uddin sees low rates persisting till as late as 2025.
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In a landmark meeting of the Federal Open Markets Committee (FOMC), the US Federal Reserve announced that low interest rates are likely to prevail until at least 2023. Until then, Fed policy rates are expected to remain in the 0.0%-0.25% range (median at 0.1%) together with a consistent pace of Treasury purchases and mortgage-backed securities at US$80 billion ($108.9 billion) and US$40 billion respectively.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2% for some time so that inflation averages 2 percent over time,” announced the committee. Rates are likely to remain low until these targets are achieved even if the Covid-19 pandemic recedes before then.

Such aggressive monetary policy is unlikely to have any inflationary effects considering the weakened state of the global economy and greater uncertainty on the horizon. FOMC noted that weaker demand as well as lower oil prices are presently holding down consumer price inflation. Despite a slight upward revision in inflation projections, headline and core PCE will likely reach 2% only in 2023.

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