Fed keeps interest rates near zero amid signs of slowing recovery

The Federal Reserve on Wednesday announced it would keep interest rates near zero percent amid growing concern about the slowing pace of the recovery from the coronavirus recession.

In a Wednesday statement, the Fed’s policymaking Federal Open Market Committee (FOMC) said it would leave the baseline interest rate range at zero to 0.25 percent, the level set in March as the economy buckled due to the pandemic.

The FOMC’s decision to keep interest rates unchanged was a near certainty. Fed Chair Jerome Powell and senior bank officials have all but officially ruled out hiking interest rates for several years as the U.S. faces a grueling path to recovery from the pandemic.

Not one of the 17 Fed governors and reserve bank presidents expect the bank to hike interest rates through the end of 2021, according to economic projections released Wednesday. Just one Fed official expected the bank to hike rates once by the end of 2022, and four expected at least one hike by the end of 2023.

While the U.S. economy has improved noticeably since the start of the coronavirus pandemic, it remains deeply damaged by a health crisis that has claimed nearly 200,000 American lives, according to Johns Hopkins University. 

The U.S. added 1.4 million jobs in August and saw the unemployment rate decline to 8.4 percent, according to the Labor Department, well below the Fed’s composite year-end projection in June of 9.3 percent. Fed officials  now expect the unemployment rate to decline to a median of 7.6 percent by the end of the year.

Even so, 11.5 million Americans have not yet found work after losing their jobs earlier this year. The number of new jobs added by the U.S. economy has also fallen for two consecutive months.

Weekly claims for unemployment insurance have plateaued at levels far above pre-pandemic records and the number of permanent job losses rose again in August after stabilizing in July. Other troubling signals of a fading recovery include three consecutive months of slowing consumer spending gains and retail sales gains.

Powell is scheduled to address reporters at 2:30 p.m. Eastern time.

Updated at 2:22 p.m.