Fed is expected to stay on hold as the impact of vaccines and fiscal support against pandemic is expected to give results in coming months

The US Federal Reserve is expected to keep the monetary policy unchanged in crisis-fighting mode in its first policy meeting this year.

The economy is still struggling through the shock of a pandemic as ragging new wave of Covid-19 virus caused sharp increase in the number of new infections and rising death toll, with lockdown shutting a number of businesses and boosting unemployment, but policymakers look forward to relief from new government relief package and ongoing vaccinations.

The central bank introduced significant changes to its policy in last few meetings by linking any future interest rate increase to a persistent rise in inflation and connecting any change in its $120 billion asset purchase to substantial recovery progress in the labor sector and inflation.

Weak economic data during the period since the Fed’s last meeting in December suggest that policymakers will likely keep on hold any signal that the economic boost from vaccines and subsequent surge in prices will cause them to undermine the promise of continued loose monetary policy.

Economists are optimistic and expect the recovery to start gaining pace in the spring as more of the population will be vaccinated, with more spending and Biden administration’s spending plans, expected to boost economic recovery.

Fed’s chairman Jerome Powell is likely to maintain his dovish tone, as inflation remains well below central bank’s 2% target and the level of jobs is still about 10 million short of its pre-pandemic level.