The U.S. Federal Reserve said Wednesday it would keep interest rates near zero and asset purchases at $120 billion a month. 

Earlier in July, Fed Chairman Jerome Powell told Congress the central bank is not comfortable with inflation well above 2%, where it is now, but noted the price increases in used vehicles, airline tickets and hotels seem to be temporary. 

“Inflation has risen, largely reflecting transitory factors,” the Fed said in a statement after the conclusion of the two-day, closed-door meeting.

While pressure has been mounting for the central bank to taper its asset purchases, Powell has often reiterated that the bank’s quantitative easing (QE) program advances its commitment to maximum employment. 

QE discourages a flight to safety and lowers the yields on risk assets by lowering risk-free yields in other ways, said Steven Kelly, a research associate at the Yale Program on Financial Stability, an initiative focused on understanding financial crises. Encouraging more risky borrowing has a positive effect on employment, Kelly added. 

The central bank also announced that it has established two standing repurchase agreement (repo) facilities with a minimum bid rate of 25 basis points, one for primary dealers and additional banks, and another for foreign banks. 

“The Fed wants to make sure the Treasury market stays liquid even when the Fed winds down its balance sheet,” Kelly said. “It doesn’t want funding rates to spike in the Treasury market.”

The committee did note the U.S. economy has made progress towards the Fed’s goals and that “the Committee will continue to assess progress in coming meetings.” This could point to tapering in the near future if the economy continues towards the central bank’s recovery goals.

“We also reviewed some considerations around how our asset purchases might be adjusted, including their pace and composition once economic conditions warrant a change,” Powell said in a press conference on Wednesday.

In response to a question about what counts as “substantial further progress,” Powell noted there is no single number within maximum employment that the central bank can target as it does with the price stability side of its mandate. 

“We monitor a broad range of data about different aspects of the labor market,” Powell said. “We have some ground to cover … I would want to see some strong jobs numbers.” A pullback on economic activity could happen if indoor dining or travel declines significantly because of the more transmissible Delta variant of COVID-19 while the pace of vaccinations slow, Powell added.  

“As long as there is time and space for the development of new strains, no one’s really safe,” Powell said. “It is both the right thing to do and in our interest to make sure vaccination happens broadly around the world for that reason.” 

The uneven recovery across rich and poor countries could also lead to a decrease in U.S. exports, Powell said. 

Powell added that inflation has been running above the central bank’s 2% inflation target for a few months and will continue to run above 2% for a few more months before falling back, but the bank is a “ways away” from raising interest rates.

“It’s not something that’s on our radar screen right now,” he said. 

The number of job openings compared to unemployed puts the U.S. on a path to a strong labor market with high participation, Powell added. 

“If you have high inflation, you also have high employment, they tend to go together,” Powell said. “This is a situation where they’re temporarily in different directions. We’re not at full employment, but you’re having high inflation. We feel like we’re going to be making good progress over the course of the next year or a couple years towards maximum employment.” 

Powell added that workers are looking for new jobs rather than going back to old jobs, which makes the employment process take longer. Other workers are reluctant to go back to work because of COVID-19 fears and because of a lack of child care while schools are not fully open. 

“We hear from businesses all over the country that it’s very hard to hire people, and that may be because people are shopping carefully for their next job. But the bottom line on this is people want to work, if you look at where the labor force participation rate is,” Powell said.