By Yasin Ebrahim
Investing.com – The Federal Reserve kept rates unchanged Wednesday, and pledged to keep the monetary spigot wide open as the resurgence in U.S. coronavirus cases casts doubt over the pace of the economic recovery.
The Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%.
The unchanged decision comes as the central bank continues to express caution about the economic outlook in the wake of a resurgence in cases across the United States.
Recent economic data has validated the central bank's concerns as strength in the labor market and consumer confidence appear to be on the wane.
Still, the Federal Reserve's decisive policy action since the Covid-19 pandemic struck in March, has cushioned the blow to the economy, with many on Wall Street suggesting that gross domestic product bottomed in the second quarter of the year.
The Fed’s balance sheet ballooned to $7 trillion in June, up from $4.2 trillion in February, as the central bank rolled out emergency lending programs and stepped its bond purchasing program.
In recent weeks, however, the Fed has slowed its asset purchases as it transitions from averting an economic crisis to paving the way for stabilization.
The Fed has been debating how it will adjust monetary policy as the economy recovers.
After the financial crisis, the central bank is widely believed to have tightened rates too soon on bets that inflation would gather steam. Inflation, however, struggled to reach the central bank's 2% target.
This time around, Fed members appear keen to avoid the same policy misstep, and have hinted that future monetary policy tightening should be tied to an economic metric such as inflation rising above 2%.
Fed Chairman Jerome Powell is expected to field questions on forward guidance and the broader economy at the press conference slated for 14:30 ET (18:30 GMT).