The Federal Reserve kept interest rates near zero, continuing its loose monetary policy

The Federal Reserve issued a statement after its two-day meeting saying it would keep interest rates near zero and maintain asset purchases at $120 billion per month.

In addition, the rise in inflation mainly reflects "transitory" factors, and overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and credit flows to U.S. households and businesses.

The statement said: "The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals."

The Federal Open Market Committee (FOMC) seeks to achieve maximum employment and inflation of 2 percent in the longer run. Since inflation has been running persistently below this longer-run goal, the Committee aims to achieve inflation moderately above 2 percent for some time.

The Committee expects to maintain an accommodative monetary policy stance until this goal is achieved.

In addition, the committee decided to maintain the benchmark interest rate at 0% to 0.25% until inflation reaches 2%.

In December, the Committee stated that it would continue to add at least $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities each month until substantial further progress was made toward its maximum employment and price stability goals.

The statement reads, "The committee will continue to monitor the implications of new information for the economic outlook. If risks emerge that could impede the achievement of the committee's goals, the committee will adjust the stance of monetary policy as appropriate. The committee's assessment will take into account a wide range of information, including public health, labor market conditions, inflation pressures, and inflation expectations."

Federal Reserve Chairman Powell said at a press conference that although inflation remains "well above" the Fed's long-term goal of 2% and is likely to remain at this level in the coming months, he expects inflation to fall in the medium term.

“It’s hard to say when that’s going to happen,” he said of lower inflation. “We’re not going to have high inflation for a long period of time. We think some of this will naturally dissipate as we proceed with reopening the economy, which may take some time.”

He added that labor demand is high, with payrolls increasing by 850,000 in June due to notable growth in the leisure and hospitality sector, and that he expects the impact of the coronavirus pandemic on job growth to fade in the coming months.

“As the economy reopens, bottlenecks, hiring difficulties, and other constraints are likely to continue to limit the pace of supply adjustments, and inflation could ultimately be higher and more persistent than we expect,” Powell said.