Fed, Powell and FOMC

Quick Fed Analysis: FOMC Sees Rates Near Zero Until Inflation Hovers Over 2%

The U.S. Federal Reserve released its monetary policy statement at 18:00 GMT on Wednesday. Central bank policymakers kept interest rates pinned near zero and promised to keep them there until inflation is on track to ‘moderately exceed” the U.S. central bank’s 2% inflation target “for some time.”

The change in guidance was in line with the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

This week’s Federal Open Market Committee (FOMC) meeting was the last before the U.S. Presidential election in November and contained a multitude of information that affects both the short-term and long-term aspects of the economy as well as across all markets from commodities to stocks.

Here are some of the key points derived from the Fed’s monetary policy statement and its latest economic forecasts.

  • The U.S. Federal Reserve maintained key overnight interest rates in target range of zero to 0.25 percent.
  • The median forecast of Fed policymakers is for rates to stay near zero through 2023.
  • The Fed also saw GDP declining in 2020 less than the previous forecast but growing more slowly in 2021 and 2022 than previously forecast.
  • The Fed also expects to maintain the current Fed Funds rate until the labor market has reached levels consistent with assessments of maximum employment, and inflation has risen to 2% and on track to exceed that for some time.
  • The Fed repeated its commitment to using its full range of tools to support the U.S. economy.
  • Additionally, the Fed said it seeks to achieve maximum employment and inflation at a rate of 2% over the long-run.
  • The Fed also said it will aim to achieve inflation moderately above 2% for some time so it averages 2%.
  • The Fed stated that it will maintain Treasury and agency-backed securities purchases at least at the current pace to help foster accommodative financial conditions.
  • Fed members voted 8-2 in favor of the current policy.

Key Points of Powell’s Post-Meeting Press Conference

  • When asked about inflation, Federal Reserve Chairman Jerome Powell said guidance from policymakers shows confidence in its ability to reach its 2% goal.
  • Powell also said one would expect the pace of improvement to be the fastest in the early stages of recovery.
  • When asked about the fiscal policy response, Powell said there’s been a really positive effect but more is likely to be needed.
  • When asked about the possibility of a delayed arrival of a coronavirus vaccine, Powell says we’re learning to live with COVID-19 and engage in economic activity.
  • Finally, Powell admitted that there are still areas of the economy that are going to really struggle until we have a vaccine that is in wide usage.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.