Fed to Keep Interest Rates Near Zero Until Economy Rebounds

On Wednesday, the U.S. Federal Reserve said it would keep interest rates near zero until the economy begins to recover from the disastrous effects of the coronavirus pandemic, but offered no estimated time frame. 

Since mid-March, the Fed’s key borrowing rate — the benchmark for interest rates throughout the economy — has remained between zero and 0.25 percent. The historically low rate was seen as a drastic but necessary early measure to stave off the worst effects of the coronavirus pandemic on the economy. That the rate will remain near zero for the foreseeable future demonstrates just how dire the Fed’s outlook remains.

In a video press conference, Federal Reserve Chairman Jerome Powell warned the economy will continue to decline and asked lawmakers to deliver additional stimulus packages.

“Let me just say we are going to not be in any hurry to withdraw these measures or to lift off,” Powell said. “We are going to wait until we are quite confident that the economy is well on the road to recovery.”

In the first three months of 2020, the U.S. economy contracted by 4.8 percent, the largest drop in gross domestic product since 2008, and Powell warns the worst is yet to come.

“Economic activity will likely drop at an unprecedented rate in the second quarter,” Powell said. “It may well be the case that the economy will need more support from all of us, if the recovery is to be a robust one.”

In the past six weeks, more than 30 million Americans have filed for unemployment. Meanwhile, the S&P 500 is up 30 percent since March 23 and is having its best month since 1987.