First policy meeting conducted by the Federal Reserve of Joe Biden’s presidency

The Federal Reserve of the United States on Tuesday opened its first policy meeting of President Joe Biden’s term while keeping the path of US recovery in priority. 

The Federal Open Market Committee (FOMC) promised to retain the lending rate near zero for an extended period in light of the strain sustained by the US due to the COVID-19 pandemic. 

The reaction of the financial markets will depend on the final outcome of the meeting which is expected to be announced by Jerome Powell, the Chair of the Federal Reserve. 

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Even after the stock markets show promising growth since Joe Biden has taken over the position of the US President due to his vaccine policy, the new wave of cases in addition to the logistical challenges continue to raise concerns. 

Diane Swonk, an economist at Grant Thornton said, “The Fed has been consistent in the view that the course of the virus determines the course of the economy. The surge in cases, hospitalizations and fatalities since the last meeting has been staggering.”

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The $1.9 trillion package announced by the US President in an effort to tackle the economic crisis in the country is expected to provide 5% economic growth in the next three years, according to the IMF.  

Janet Yellen, the newly instated Treasury Secretary of the US will be advocating for the stimulus package in the US Congress. 

“The Fed and Treasury will need to work closely to limit damage to the economy going forward. I can’t imagine a closer and more collegial alliance than that between Powell and Yellen,” Swonk said.

Even as the Fed takes more of a back seat, Powell faces the prospect of managing monetary policy under Biden that is unlikely to subject him to the barrage of Twitter attacks and insults he was subject to, sometimes daily, under Donald Trump.