The US Federal Reserve said that the Covid-19 pandemic continues to weigh on the American economy and the labour market, reiterating the central bank will maintain its ultra-loose monetary policy.
“Over the first half of 2021, progress on vaccinations has led to a reopening of the economy and strong economic growth, supported by accommodative monetary and fiscal policy,” the Fed said in its semi-annual monetary policy report to Congress on Friday.
“However, the effects of the Covid-19 pandemic have continued to weigh on the US economy, and employment has remained well below pre-pandemic levels,” the report said.
While the US unemployment rate declined by 0.8 percentage point in the first half of the year to 5.9 per cent in June, the figure understates the shortfall in employment, particularly as factors related to the pandemic appear to be weighing on participation in the labour market, Xinhua news agency quoted the report as saying.
“With less than half of the population fully vaccinated for Covid-19 and inoculation rates far lower in some places, safety in the workplace remained a salient issue for many potential workers, and caregiving demands were still elevated for many households.”
The report also noted that consumer price inflation has increased notably this spring as a surge in demand has run up against production bottlenecks and hiring difficulties.
“As these extraordinary circumstances pass, supply and demand should move closer to balance, and inflation is widely expected to move down,” the report said.
The report reiterated that the Fed is committed to using its full range of tools to support the US economy in this challenging time, as “risks to the economic outlook remain”.
The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of $120 billion per month until the economic recovery makes “substantial further progress”.
The Fed’s balance sheet has grown to $8.1 trillion from $7.4 trillion at the end of January, according to the report.