Fed sees rates near zero through 2023

WASHINGTON » With the economy still struggling to recover from the pandemic recession, Federal Reserve policymakers signaled Wednesday that their benchmark short-term interest rate will likely remain at zero at least through 2023 and possibly even longer.

Fed chair Jerome Powell said at a press conference that while the economy has rebounded more quickly than expected, the job market is still hurting and the outlook is uncertain. The unemployment rate has fallen steadily since the spring but is still 8.4%.

“Although we welcome this progress we will not lose sight of the millions of Americans that remain out of work,” Powell said.

The Fed left its benchmark interest rate unchanged at nearly zero, where it has been pegged since the virus pandemic intensified in March. The rate influences borrowing costs for homebuyers, credit card users, and businesses. Fed policymakers hope an extended period of low interest rates will encourage more borrowing and spending, though their policy also carries the risk of inflating a bubble in stocks or other financial assets.

Fed officials said in a set of quarterly economic projections that they expect to keep rates at zero through 2023. And in a statement released after its two-day meeting, the Fed said it wouldn’t raise borrowing costs until inflation has reached 2% and appears likely to “moderately exceed” that level for an extended period.

The Fed’s projections show that policymakers don’t expect inflation to hit that target until the end of 2023.