The Federal Reserve said Wednesday that it would keep its target for short-term interest rates near zero.
The central bank had pledged in September to maintain interest rates between 0% and 0.25% until inflation rose to 2% and employment improved, which it saw then as a matter of years.
Since September, the unemployment rate has dropped from 7.9% to 6.7%. Fed officials projected Wednesday that the unemployment rate could drop as low as 5% next year.
Despite the projected improvement in employment, Fed Chairman Jerome Powell on Wednesday would not say whether or not a reduction in the jobless rate to 5% would prompt the Fed to increase interest rates.
“We’re not going to be identifying specific numbers at this point,” he said.
The Fed slashed rates and began massive bond purchases in the spring in response to the sudden downturn caused by the coronavirus pandemic.
The Fed, in its Wednesday release, announced it will keep buying $120 billion of government-backed bonds a month “until substantial further progress has been made.”
Still, Powell acknowledged that the economic recovery from the pandemic has “progressed more quickly than generally expected.”
Also, many of the projections the Fed made in September have been upgraded in its most recent projections.
For example, its September projection for unemployment in 2021 was 5.5%, versus 5% now. For GDP, it now projects a 4.2% increase in real GDP, versus 4.0% in September.
