As the COVID-19 pandemic poses ongoing risks to public health and the economic outlook, the Federal Open Market Committee continues to provide full support for the U.S. economy. The latest FOMC meeting reflects this commitment with the Fed’s decision to maintain the target range for the federal funds rate at 0 to ¼ percent and to expand purchases of U.S. Treasury and mortgage-backed securities.
All of this is meant to bolster the economy and stabilize markets. But how does it work? FOMC Rewind breaks it down.
Sept. 16, 2020 FOMC Decision
So, what was decided at the latest FOMC meeting?
Transcript
Sean: Hey Remy, looks like the Fed was in the news.
Remy: Oh yeah! They just met. They kept their main interest rate near 0%.
Sean: No change there, right?
Remy: Right, and they expect that rate to stay low for a long time to help the economy recover from the pandemic.
Sean: How does that help?
Remy: Low rates make it cost less to borrow money. That can help businesses get back on track and hire more workers.
Sean: How long will it last for?
Remy: Until there are enough jobs for anyone who wants to work, prices start rising a bit faster like in a normal economy, and people are confident that will continue.
Sean: Is that the only way they can help?
Remy: The Fed is also buying lots of bonds to keep longer-term interest rates—like mortgages—low.
Sean: Great, thanks!
Remy: NP!
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.