The Federal Reserve (Fed) reaffirmed today that the expansive monetary policy, with interest rates close to 0% and successive injections of liquidity, will remain “for a while” given the “considerable risks” derived from a second wave of the coronavirus pandemic.

“Participants stressed that they expect to maintain their interest rate target for a while until they are confident that the economy has overcome recent events,” according to the minutes of their last meeting on 9-10 June.

They also stressed the “considerable risks” to the country’s economic outlook.
Among them, they noted as “plausible” a “second wave of the coronavirus” by the end of the year that would force “tight” mobility restrictions with a consequent fall in real GDP, a jump in the unemployment rate and renewed downward pressure on inflation for the coming year.

The latest Fed projections, revealed in June, point to a 6.5% contraction in US GDP in 2020, followed by a 5% rebound next year.

The next Fed meeting is scheduled for July 28-29.
The United States is currently experiencing a surge in COVID-19 infections, with more than 40,000 cases per day and a death toll already exceeding 127,000, especially in the South and West, in the midst of the reopening process and the gradual lifting of restrictions initiated at the end of May.

In fact, in several states in the country, including Texas and California, two of the most populous, the authorities have had to reverse the progressive reopening of the economy in the face of recent outbreaks of contagion.

Economic activity in the country came to a standstill in mid-March for almost two months due to containment measures and mobility restrictions to contain the spread of the virus.

The pandemic then forced thousands of businesses in the country to close or severely restrict their activities to stop the spread of the virus, bringing the employment rate down from 3.5% at the beginning of the year to 14.7% in April, but down slightly to 13.3% in May.

This situation led to the largest fall in GDP in the first quarter since the major crisis over a decade ago, with a fall of 5% in annual terms.

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