Federal Reserve pledges ‘powerful support’ for economy

WASHINGTON — The Federal Reserve says its low interest rate policies are providing “powerful support” for the economy as it recovers from the coronavirus pandemic.

In its twice-a-year report to Congress on monetary policy released today, the Fed indicated that it planned to maintain that support until further progress is made in recovering from last year’s severe recession.

During the first half of this year progress on vaccinations helped to reopen the economy and produced strong economic growth, according to the Fed, but it said the lingering effects of the pandemic continue to weigh on the economy, with employment well below pre-pandemic levels.

Shortages of materials and difficulties in hiring had held back activity in a number of industries and bottlenecks and other transitory factors had boosted inflation, according to the Fed.

The Fed debated the contents of the report at its last meeting on June 15-16. Minutes of those discussions showed that central bank began consideration of when and how they will start reducing their $120 billion in month bond purchases which they have used to keep longer-term interest rates in check.

The minutes indicated that the Fed is moving closer to trimming those purchases but most private economists don’t expect the actual tapering to begin until late this year or perhaps not until early in 2022.

Fed Chairman Jerome Powell will testify on the monetary report during House and Senate hearings that will start on Wednesday.