The New York City skyline in the United States

United States Monetary Policy June 2020

United States: Fed keeps rates at effective floor and additional stimulus measures unchanged in June

At its 9–10 June meeting, the Federal Open Market Committee (FOMC) held the target range for the federal funds rate at its effective floor of 0.00%–0.25%. Moreover, the Fed reaffirmed its commitment to using its full range of powers to support the economic recovery.

The Fed decided to keep the target range at its effective floor due to the grim economic outlook, which is expected to keep unemployment and inflation levels depressed in the short term. Lockdown measures to contain the virus have battered employment levels, while lower oil prices and weak demand have dragged on inflation in recent months. To ensure sufficient flow of credit to households and businesses and the effective transmission of monetary stimulus to broader financial conditions, the Fed will also sustain its purchases of Treasury securities, and agency residential and commercial mortgage-back securities at its current pace, as well as continuing to offer large-scale overnight and term repurchase agreement operations.

Looking ahead, the Fed will likely keep the target range and its asset purchasing programs at its current rate until “it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”. The Bank also stands ready to act appropriately to support the economy if conditions deteriorate further.

Commenting on June’s meeting, analysts at Goldman Sachs noted:

“We continue to expect forward guidance that delays liftoff roughly until the economy reaches full employment and 2% year-on-year inflation, though the exact criteria are quite uncertain. We also expect the FOMC to introduce front-end yield curve control that caps Treasury yields out to a horizon somewhat short of the date when the liftoff criteria are likely to be met.”

The next FOMC meeting is scheduled for 28–29 July.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest