Fed points to strengthening economy but says still not time for policy shift

The US Federal Reserve, as widely expected, left its interest rate and bond-buying program unchanged and said that loose monetary policy will remain for the foreseeable future even as it sees the economic recovery gaining pace and risks from the pandemic starting to ease.

The central bank took a brighter view of the economic recovery and the fight against the COVID-19 pandemic but said that it is not time yet to begin discussing any change in policy which provides an emergency support to the economy during the crisis.

Fed Chair Jerome Powell said that there is still long way from their goals and the recovery is going to take some time, as American labor sector is still short 8.5 million jobs compared to February 2020.

Powell stressed that coronavirus is posing considerable risks to the economic outlook and the path of the economy will depend significantly on the course of the virus.

Although progress in vaccination, strong policy support and indicators that economic activity and employment have strengthened signal that economic recovery is gaining pace, the economy would heal only if there was really significant progress in the fight against the disease.

However, Fed’s strong language on the economy prospects suggests at least a small step towards the start of a discussion about when the central bank would start easing its crisis policy settings.