US Federal Reserve keeps interest rates near 0 amid COVID-19 fallout

The US Federal Reserve on Wednesday kept its benchmark interest rate unchanged at the record-low level of near 0, as the COVID-19 fallout continues to ripple through the country.

"The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said in a statement after concluding a two-day policy meeting, adding the Fed`s policy-making committee decided to maintain the target range for the federal funds rate at 0-0.25 per cent, Xinhua reported.

"The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," said the central bank.

The Fed noted that the virus and the measures taken to protect public health "are inducing sharp declines in economic activity and a surge in job losses," which have also significantly affected financial conditions.

In order to support the flow of credit to households and businesses, the Fed will continue to purchase Treasury securities and agency mortgage-backed securities "in the amounts needed" to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.

The Fed statement came after the US Commerce Department reported earlier in the day that US real gross domestic product in the first quarter contracted at an annual rate of 4.8 per cent, the biggest quarterly decline since the 2008 financial crisis.

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"Overall, economic activity will likely drop at an unprecedented rate in the second quarter," Fed Chairman Jerome Powell said Wednesday afternoon at a press conference.

"Both the depth and duration of the economic down turn are extraordinarily uncertain and will depend in large part on how quickly the virus is brought under control," he said, adding the central bank is committed to using full range of tools to support the economy in this challenging time.