Fed Maintains Low Interest Rates

Author: Corey McDowell - Economics Editor

Published: 31 Jul 2020

Last Updated: 31 Jul 2020

Synopsis

An article by Jon Clarke

Following the latest meeting of the Federal Open Market Committee (FOMC), Jerome Powell, Chairman of the Federal Reserve, released a statement committing the Fed to supporting the U.S. economy, warning that another swell of covid infections has been a significant factor in influencing this cautious financial outlook.  

Jerome Powell, Chairman of the Federal Reserve

How Has Covid Impacted The US Economy?

The recent surge in coronavirus cases across the United States, has led to further uncertainty about the health of the nation’s economy and the prominence of the greenback as the world’s reserve currency.

Powell, has vowed to use all available tools to support the U.S. economy by extending measures to ensure that the global financial system has a necessary supply of dollars available.  These measures come alongside a landslide of actions facilitating easy access to credit and possible extensions for jobless aid for millions of Americans. By maintaining its near-zero interest rate and temporary liquidity swap lines, the financial sector will still be able to borrow and lend as businesses require. 

The Fed’s response to the crisis has come as no surprise to many as the already loose monetary policy and inflationary threats to the dollar have led more and more investors to the “safe haven” of gold. George Gero of RBC Wealth Management stated the trifecta of longer, lower interest rates and coronavirus headlines would be helpful for gold as low interest rates give way a benign dollar, perhaps paving the way for the precious metal to break past the $2,000 mark.  

Echoing these statements, Goldman Sachs, and Bank of America have predicted further increases in gold prices over the next 18 months due to the inflationary threat to the dollar. Powell also stated that both monetary and fiscal policies were required to help in the recovery, and that the increase in coronavirus cases and the measures to control them, are weighing on this turnaround.

Further Reading

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