The Federal Reserve left its target range for the federal funds rate unchanged

The US Federal Reserve announced on 16th to maintain the target range of the Federal Funds rate at zero to 0.25%, in line with market expectations. The Fed also raised its forecast for US economic growth this year to a contraction of 2.4 per cent.

U.S. economic activity and employment continue to recover, but remain well below the levels seen at the start of the year, the Fed said in a statement at the end of its two-day policy meeting. Weak demand and earlier falls in oil prices held back consumer price rises. Meanwhile, overall financial conditions remain loose. Economic development will largely depend on the results of epidemic prevention and control. The continuing public health crisis will continue to weigh on economic activity, employment and inflation in the short term and pose considerable risks to the economic outlook in the medium term.

The Fed said it would continue to increase its holdings of Treasuries by at least $80bn a month and buy agency mortgage-backed securities by at least $40bn a month until it made substantial progress towards its goals of full employment and price stability.

On the same day, the Fed also released its latest economic outlook, predicting the US economy will contract by 2.4 per cent in 2020, up 1.3 percentage points from its September forecast. Meanwhile, the Fed expects the US economy to grow 4.2 per cent in 2021, up 0.2 percentage points from its previous forecast.

The Fed also expects the UNEMPLOYMENT rate to hit 6.7 per cent this year, down 0.9 percentage points from its previous forecast. Unemployment is expected to be 5 per cent in 2021 and 4.2 per cent in 2022, both lower than previously forecast. On the price front, U.S. inflation is expected to be just 1.2% this year, unchanged from previous forecasts and below the Federal Reserve's 2% inflation target. Excluding food and energy prices, core inflation was 1.4 per cent, 0.1 percentage point lower than previously forecast.

In addition, all 17 members of the Federal Open Market Committee agreed that the target range for the federal funds rate would remain at an ultra-low level of zero to 0.25 per cent through 2020 and 2021. Most officials expect the range to remain unchanged until 2023.

At a news conference after the meeting, Federal Reserve Chairman Colin Powell said the U.S. economy continued to recover from the second-quarter recession, but the pace of improvement has slowed in recent months. Overall economic activity remains well below pre-epidemic levels and the road ahead is highly uncertain. In particular, the recovery in the job market has slowed, with millions of Americans still out of work, and the impact of the epidemic on different populations has been uneven.