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The Fed: Fed stays the course on easy policy stance, sees improvement even in weakest sectors

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The Federal Reserve on Wednesday stayed the course on monetary policy, holding interest rates steady and continuing with its asset purchases while being more upbeat about the economic outlook.

In post meeting policy statement, the Fed said “amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened” over the past six weeks.

Even the sectors hardest hit by the COVID pandemic have shown improvement, the central bank said.

The Fed removed language from its prior statement that the ongoing health crisis was a “considerable risk” to the economy.

The Fed kept its policy interest-rate close to zero. In addition, the Fed said it would continue buying $120 billion of assets to support the economy.

The first step for the Fed to withdraw its easy policy would be to slow down, or taper, asset purchases. The central bank has guided markets that it will only begin to taper when it sees “substantial further progress” in its twin goals of full employment and 2% stable inflation.

The Fed statement noted that inflation has risen but said it was largely due to “transitory factors.”

Economists think the Fed is months away from any decision to taper its bond buying program.

“Everybody should ignore the Fed for the next six to nine months. They are not going to do anything. No matter how much people in the markets start freaking out…Chair Powell has made it very clear: they are going to sit tight and let inflation come to them before they do anything,” said Adam Posen, the chair of the Peterson Institute for International Economics.

Markets seem less concerned about the path of expected future interest rates increases as the yields on 10-year Treasury notes
BX:TMUBMUSD10Y
have not moved much in a month.

Read: Debt markets are getting the memo on the path of likely rate hikes

U.S. stocks
DJIA,
-0.33%

SPX,
+0.08%

were little changed after the Fed’s decision. Powell will hold a press conference beginning at 2:30 p.m. Eastern.

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