Federal Reserve Chairman Jerome Powell made clear the U.S. central bank was nowhere near exiting massive support for the economy during the ongoing coronavirus pandemic, as officials left their benchmark interest rate unchanged near zero and flagged a moderating U.S. recovery.
The central bank’s policymaking body repeated it would maintain its bond-buying program at the current pace of $120 billion of purchases a month until “substantial further progress” toward its employment and inflation goals has been made. It made no changes to the composition of purchases.
Mr. Powell told a news conference Wednesday following a meeting of the Federal Open Market Committee that it would take “some time” to achieve the threshold for altering asset purchases, making clear the central bank was not close to dialing them back.
“The whole focus on exit is premature,” he said, noting that the U.S was a long way from a full recovery and the Fed would take care to communicate clearly — to make sure no one was taken by surprise of what he promised would be a gradual taper of purchases when the time came.
He also said that the widespread availability of vaccines were grounds for optimism, noting “several developments point to an improved outlook for later this year.” Mr. Powell said he had received the first shot of the vaccine himself and expected to get the second shot soon.
Yields on 10-year Treasuries hovered just above 1%, while the dollar held its advance and the S&P 500 extended losses on the day as Mr. Powell spoke.
Though stocks declined Wednesday, Mr. Powell was asked multiple questions about soaring prices in recent months, but declined to comment directly on spikes in the company GameStop in particular.
“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the FOMC said in its statement. The revised language followed reports showing U.S. employment fell in December for the first time since April, and retail sales tumbled for a third straight month, amid resurgent coronavirus outbreaks across the country.