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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
September 22, 2021
This is #6 of 8 FOMC meetings this year.
For release at 2:00 p.m. EDT – This is the time of day nearly all FOMC announcements are made.
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. ß Same two goals but how the FOMC uses it’s tools is about to change. This dual mandate came out of an amendment to the Federal Reserve Act in 1977.
With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery. Inflation is elevated, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain. Similar to last month, the FOMC continued to mention vaccinations playing a key role to the strength of the economic recovery. There is an acknowledgement that sectors hit hardest by the pandemic were improving and have now improved. It’s subtle but this is how Team Powell tweaks words to show how the economy is evolving. They also acknowledged inflation is elevated but that it remains…transitory.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses. This paragraph went from “we’ll be watching closely” to officially teeing up a taper. “If progress continues…” adjustments to the $120B of monthly asset purchases may be warranted (soon). This is how the FOMC can telegraph where they think they will go without boxing themselves into a dollar amount or timeline. It’s a thing of beauty really. This essentially means we’re heading on the right path and we should all expect QE modificaitons but the door is open for any potential roadblock in progress. While we’ve historically talked about the Fed raising or lower the Fed Funds rate, much more focus is being placed on the current asset purchases. There were no changes to rates by the Fed and they aren’t expecting rate changes until 2022 or 2023.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments. They might as well say Past Performance Does Not Predict Future Results. But they are prepared and will remain so.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller. Powell and Team were all in agreement.
