All told, the Fed’s credit tightening will likely mean higher loan rates for many consumers and businesses over time, including for mortgages, credit cards and auto loans. With prices for food, energy and consumer goods accelerating, the Fed’s goal is to cool spending — and economic growth — by making it more expensive for individuals and businesses to borrow.
The US economy is expected to expand at 5.9 per cent this year, lower than 7 per cent estimated in June, according to the median forecast of the Fed's latest summary of economic projections released also on Wednesday.
"The path of the economy continues to depend on course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain," the Fed said in a statement after concluding a two-day meeting, Xinhua reported.
"Over 1st half of 2021, progress on vaccinations has led to a reopening of the economy and strong economic growth, supported by accommodative monetary and fiscal policy," the Fed said in its semi-annual monetary policy report to Congress on Friday.
In a drastic measure to stem any major disruption to the US economy as a result of the coronavirus outbreak, the Federal Reserve has cut its benchmark interest rate to almost zero and said it would buy USD700 billion in bonds.
Jerome Powell is confronting his stiffest test yet as head of the Federal Reserve in an atmosphere vastly altered from what his predecessors faced. It makes an uncertain situation even more challenging.
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