US inflation will be constrained in the near future by weak demand for goods and services and significantly lower oil prices, minutes from the Federal Reserve' latest monetary policy meeting showed
WASHINGTON (Pakistan Point News / Sputnik - 21st May, 2020) US inflation will be constrained in the near future by weak demand for goods and services and significantly lower oil prices, minutes from the Federal Reserve' latest monetary policy meeting showed.
"Weaker demand and significantly lower oil prices are holding down consumer price inflation," said the minutes from the Fed's April 28-29 meeting, published on Wednesday.
The Fed said it makes sense for the world's largest economy to hold interest rates at near zero to spur recovery from the coronavirus (COVID-19) pandemic.
The public health crisis triggered by COVID-19 will weigh heavily on economic activity, employment and inflation in the near term, and pose considerable risks to the US economic outlook over the medium term, the minutes said.
"The Federal Reserve is committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum employment and price stability goals," said the minutes which emerged from the meeting held by the central bank's Federal Open Market Committee. "In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. 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 typically strives for an inflation rate of 2 percent, a target it has consistently fallen short of the past decade.
US crude oil prices fell nearly 70 percent on the year by April as the pandemic shuttered most non-essential businesses in the world's number one economy. They have recovered in the past three weeks to show an annual decline of about 45 percent now.
Besides oil prices, some 36 million Americans have lost their jobs over the past two months while the US economy itself shrank 4.8 percent in the first quarter of the year for the sharpest such decline since the Great Recession of 2008/09. While all 50 states in America have reopened their economies in one way or another over the past two weeks, economists warn of a sharp recession by the second quarter, meaning more bleak data to come.
