Fed keeps rates near zero as economy faces blow from coronavirus case spikes

The Federal Reserve on Wednesday kept interest rates near zero percent as the U.S. economy continues to reel from the devastation of the coronavirus pandemic.

In a Wednesday statement, the central bank’s policymaking Federal Open Market Committee (FOMC) announced it would maintain the zero to 0.25 percent baseline interest rate range. The Fed slashed rates to near-zero levels on March 15 amid chaos in financial markets triggered by the onset of the pandemic in the U.S.

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the FOMC said.

The Fed’s decision was widely expected as the U.S. continues to deal with spikes in coronavirus cases that have already derailed a burgeoning economic recovery. There are nearly 4.4 million confirmed cases of COVID-19 in the U.S. as of Wednesday, according to Johns Hopkins University, causing more than 149,000 deaths.

While the U.S. has recovered roughly 8 million of the more than 20 million jobs lost early to the pandemic, those gains appear to be slipping amid the surging number of cases across much of the country. Economists also fear that recent lapses of enhanced unemployment benefits and a federal eviction and foreclosure moratorium could cause a deeper downturn with staggering long-term damage.

“The path of the economy will depend significantly on the course of the virus. 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 FOMC said.

“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.”

The Fed’s decision comes amid negotiations among the Trump administration, Senate Republicans and Democratic congressional leaders over the size and scope of another coronavirus response and economic relief bill. Senate Republicans on Monday unveiled a $1 trillion package that Democrats quickly condemned as insufficient to meet the needs of the crisis.

Federal Reserve Chairman Jerome Powell has pressed lawmakers for months to spend generously to defeat the virus and help Americans sustain themselves until the economy is able to fully recover.

Powell ramped up his calls for another economic aid package from Congress during a Wednesday press conference, insisting that more fiscal and monetary stimulus will be needed to prevent further damage to the economy.

“In a broad sense it’s been well spent. It’s kept people in their homes, it’s kept businesses in businesses,” Powell said of past fiscal stimulus efforts. He added that workers laid off from the hardest hit industries will need steady support until the virus is controlled enough to allow the restaurant, bar, hospitality, live entertainment and travel sectors to recover.

“Many of those people are going to find it hard,” Powell said. “They are going to need to support if they’re to be able to pay their bills, to continue spending money” and remain in their homes.

Updated at 3:10 p.m.