Federal Reserve pledges 'powerful support' for economy

WASHINGTON (AP) — The Federal Reserve says that 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 Friday, the Fed indicated that it plans to maintain that support until further progress is made in recovering from last year's severe recession.

Progress on vaccinations helped to reopen the economy and produced strong economic growth over the first half of this year, the Fed noted. But the lingering effects of the pandemic still weigh on the economy, with employment well below pre-pandemic levels.

The central bank has kept its benchmark interest rate near zero, while continuing to buy $120 billion a month in Treasury bonds and mortgage-backed securities to put downward pressure on long-term interest rates. It said Friday that these efforts will help ensure that “monetary policy continues to deliver powerful support to the economy until the recovery is complete.”

The new report will be the subject of two days of hearings next week. Fed Chairman Jerome Powell will testify Wednesday before the House Financial Services Committee, and Thursday before the Senate Banking Committee.

Lawmakers will seek details on exactly when the central bank will start cutting back on its bond purchases, and when it will begin raising interest rates.

The report Friday repeated wording used by the central bank since last year, explaining that it does not expect to begin raising interest rates until its goals on maximum employment and inflation have been reached.

It also reiterated the Fed's expectation that monthly bond purchases will remain at the level of $120 billion “until substantial further progress has been made” toward its employment and...