The U.S. Federal Reserve is expected to maintain its ultra-loose monetary policy as the economic recovery remains far from complete, analysts said.
"We expect the Fed to maintain its policy rate between a range of zero and 0.25%, with no changes to the central bank's forward guidance with respect to asset purchases," following a two-day policy meeting that will end on Wednesday, said Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP.
"In the news conference after the meeting, we anticipate that Federal Reserve Chairman Jerome Powell will continue to emphasize the Fed's patience and the central bank's outcome approach on its flexible average inflation target and its definition of full employment," Brusuelas wrote Monday in a blog post.
While U.S. employment, retail sales and the housing market have all expanded since the Fed's last meeting in March, Diane Swonk, chief economist at Grant Thornton, a major accounting firm, expected Powell to focus on "how far we still are from a full recovery" at the press conference scheduled Wednesday afternoon.
"It would take more than one year of employment gains like we saw in March to recoup what was lost to the crisis and return the economy to the trend we were on before the pandemic took hold," Swonk wrote Sunday in an analysis.
"Fed officials learned that the longer they let the expansion go on, the better the outcomes for the most marginalized of workers," she added.
The Fed has pledged to keep its benchmark interest rate at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until the economic recovery makes "substantial further progress".
Economists at Wells Fargo Securities believed that the U.S. labor market would need to "strengthen significantly" before the Fed starts to publicly contemplate a tapering of asset purchases.
"Although market participants are eagerly looking for clues on the timing of eventual tapering, we suspect the FOMC will stay mum on the subject at its upcoming meeting," the economists wrote in a recent report, referring to the Federal Open Market Committee, the Fed's policy-making committee.
"My sense is that the Fed intends to wait until we push through the initial rebound of the economy before shifting policy," echoed Tim Duy, chief U.S. economist at SGH Macro Advisors.
As the U.S. economy recovers strongly from the COVID-19 pandemic, the Fed is likely to announce that the central bank will begin tapering asset purchases before the end of the year, according to a survey of 49 economists released by Bloomberg on Monday.
About 45 percent of the economists expect the Fed to announce tapering in the fourth quarter while 14 percent see that happening in the third quarter, the survey showed.
A recent survey from the National Association for Business Economics (NABE) also showed that 95 percent of panelists anticipated U.S. real gross domestic product (GDP) to expand by at least 3 percent from the first quarter of 2021 through the first quarter of 2022. The U.S. economy saw a 3.5-percent contraction in 2020 amid the pandemic.
