The Fed pledges to proceed shopping for bonds till the financial system returns to full employment

The Federal Reserve made an important adjustment to its economic support efforts while improving its growth potential.

As expected, the Fed kept policy rates close to zero after its two-day meeting on Wednesday.

One area investors watched was whether the Fed would outline results-oriented guidelines setting out the conditions for a policy reversal.

The Fed said it would continue to buy at least $ 120 billion worth of bonds each month “until significant further progress is made in meeting the committee’s maximum employment and price stability targets,” the statement said after the meeting.

“These asset purchases help promote the smooth functioning of the market and favorable financial conditions, thereby helping the flow of credit to households and businesses,” added the Federal Open Market Committee in a statement that was unanimously adopted.

However, the committee did not say it would extend the duration of these purchases.

The markets had been looking for possible improvements the FOMC would make to its asset purchase program. Since the beginning of the coronavirus pandemic, the central bank has mainly bought bonds with shorter maturities to keep financial markets functioning.

At the recent meetings, officials discussed the benefits of extending the maturity of the bonds to give the economy a stronger boost, similar to what happened after the 2008 financial crisis.

Extending the term helps lower longer-term interest rates, lower borrowing costs, and drive the return-hungry investors into riskier assets like stocks.

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