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Interest rates may remain zero until 2023-2024

24 November 2020
1862
2 min.
8
Interest rates may remain zero until 2023-2024

Recovery of the United States economy

The Fed can keep rates zero for another three to four years while the US economy recovers and inflation reaches 2% or more.

Charles Evans, President of the Chicago Federal Reserve Bank, said he expects "a fairly long way" before the US economy recovers from the Coronavirus Pandemic crisis. He expects the Fed to maintain interest rates at current levels of 0%-0.25%, possibly until 2024.

Evans said: "If next year's economy recovers and we beat the virus and the vaccines are very effective and they are being introduced quickly and everywhere, then we'll be in a much better position".

News of the soon-to-be-approved FDA approval for Pfizer (PFE) and BioNTech and Moderna (MRNA) coronavirus vaccines is giving financial markets a positive sentiment amid a difficult situation with rising morbidity and low employment. In addition, legislators have not adopted a new stimulus package for the economy and, analysts say, it is unlikely to be adopted before Joe Biden's inauguration.

Last week Finance Minister Steven Mnuchin announced the expiry of key Fed lending programmes on 31 December to return unused funds to the Treasury.

The Fed, in turn, calls on the government to increase federal aid, both for those who lost their jobs due to the pandemic and for states and local authorities where budgets have been affected by falling tax revenues.

In addition, the President of the Federal Bank of Chicago said that a little additional fiscal support would remove more uncertainty from the current situation.

The Fed's current strategy is to support interest rates around zero until the US economy reaches full employment and inflation not only reaches but exceeds the 2% target. According to Evans, inflation is unlikely to reach 2% by the end of 2022 or even 2023, so rates may not rise even until 2024.

Persons3 and Companies5 in the news

President of the Federal Reserve Bank of Chicago
1 place
46th President of the United States
2 place
Secretary of the Treasury
3 place
BioNTech
2 place
Moderna
3 place
Pfizer
5 place
Section:

Discussion

Rating companies
Tesla
52 Mention
Apple
51 Mention
Amazon
49 Mention
Nasdaq
46 Mention
Dow Jones
40 Mention
Facebook
38 Mention
White House
31 Mention

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