Fed to keep providing aid and sees no rate hike through 2022

WASHINGTON (AP) — Confronted with an economy gripped by recession and high unemployment, the Federal Reserve made clear Wednesday that it will keep supplying all the help it can by buying bonds to maintain low borrowing rates and forecasting no rate hike through 2022.

The Fed has cut its benchmark short-term rate to near zero. Keeping its rate ultra-low for more than two more years could make it easier for consumers and businesses to borrow and spend enough to sustain an economy depressed by still-widespread business shutdowns from the coronavirus.

Stock prices rallied modestly on the news after having been mainly lower before the Fed issued its latest policy statement at 2 p.m. Eastern time.

In a statement after its latest policy meeting ended, the Fed also credited its emergency lending programs for reviving the flow of credit to households and businesses, after markets had locked up in March when investors sold a range of securities to boost their cash holdings.

The central bank noted in its statement that the viral outbreak has caused a sharp fall in economic activity and surge in job losses. Fed officials estimate that the economy will shrink 6.5% this year, in line with other forecasts, before expanding 5% in 2021. They foresee sees the unemployment rate at 9.3%, near the peak of the last recession, by the end of this year. The rate is now 13.3%.

The Fed also specified that it will buy $80 billion of Treasury securities a month and $40 billion in mortgage-backed securities. The central bank has been slowing its purchases from as high as $375 billion a month in March. But this is the first time that the Fed has indicated the size of the purchases it will pursue in the coming months.

At a virtual news conference Wednesday afternoon, Chairman Jerome Powell is expected to drive home the message that the economy...