Fed sees dim economic outlook as virus squeezes economy

WASHINGTON (AP) — The Federal Reserve expressed concern Wednesday that the viral outbreak will act as a drag on the economy and hiring in the coming months and said it plans to keep its benchmark short-term interest rate pegged near zero.

In a statement at the end of its policy-making meeting Wednesday, the Fed acknowledged that the economy has rebounded from the depths of March and April, when nearly all states closed down nonessential businesses. But it said the ongoing coronavirus pandemic “will weigh heavily on economic activity, employment and inflation."

The Fed announced no new policies in its statement. It said it will also continue to buy about $120 billion in Treasury and mortgage bonds each month, which are intended to inject cash into financial markets and spur borrowing and spending.

“Economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the Fed's statement said.

In one of the few changes from their previous statement in June, the Fed policymakers added: “The path of the economy will depend significantly on the course of the virus” — an acknowledgement that uncertainty about when the health crisis might be solved has complicated the Fed's ability to set interest rate policy. It's an observation that Chair Jerome Powell has made, in one way or another, for months as most states have succeeded only fitfully in controlling the virus and the ability of businesses to stay open.

Economists say the Fed has time to consider its next policy moves because short- and long-term rates remain historically ultra-low and aren't restraining economic growth. Home sales have picked up after falling sharply in the spring. The housing rebound has been fueled by the lowest loan rates on record, with the average 30-year...