The Federal Reserve on Wednesday announced that it will keep its interest rate target near zero.
Officials projected not raising the rates through at least 2022. In fact, Fed Chairman Jerome Powell said on Wednesday that raising rates is not being discussed at his organization.
“We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates,” he said.
The central bank last cut its interest rate target on March 15 to between 0% and 0.25% in an emergency response to the pandemic. Powell has said the target will not change until the nation has been able to contain the spread of the coronavirus.
He also expects an economic recovery to begin in the next quarter and last for a couple of years.
“Generally, the expectation of an economic recovery is beginning in the second half of this year and lasting over the next couple of years, supported by interest rates that remain at their current level, near zero,” he said.
The Fed also projects the nation’s gross domestic product to contract 6.5% in 2020 and that the unemployment rate will fall to 9.3% before the year is over.
The economy gained 2.5 million jobs in May, lowering the unemployment rate to 13.3%, the Labor Department said Friday.
Powell deemed the jobs gains as “nice to see” and that almost no one saw them coming as the expectation in jobs gains were to begin as soon as June, not May.
He was also hesitant to say that the jobs crisis is over based upon one report and said that millions of workers will probably not return to the labor market once the economic crisis has passed.
The payroll gains in May, the largest on record, represented a stunning development and a hint that the worst-case scenario for the economy might not come to pass. Forecasters had expected job losses of 8 million and an unemployment rate of about 20%.
“This looks like the shortest recession in history,” said Chris Rupkey, chief financial economist for MUFG.
The stock markets have also rebounded. The S&P 500 at Monday’s closing bell erased its losses for the year created by the economic shutdown to slow the spread of the coronavirus. In trading on Wednesday, the markets gave back some of those gains as investors awaited the Fed statement.
