FOMC meeting ends and investors gain clarity

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The most important economic event of the month ended today. The FOMC meeting ended today and the Federal Reserve issued a statement accompanied by a press conference by Fed Chairman Jerome Powell. Clarity regarding the details of the Fed’s revamped monetary policy that market participants have been waiting for has been resolved.
In his opening statement at the press conference immediately following the conclusion of today’s meeting, President Powell said: “Good afternoon at the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has set for us – maximum employment and price stability. . Since the start of the pandemic, we have taken strong action to provide some relief and stability, to keep the recovery as strong as possible and to limit the lasting damage to the economy. Today my colleagues on the Federal Open Market Committee and I made some important changes to our policy statement, including an update to our advice on the likely evolution of our key interest rate. “
The statement released by the Federal Reserve began by saying, “The Federal Reserve is committed to using its full range of tools to support the US economy during these difficult times, thereby promoting its goals of maximum employment and stability. prices.
The COVID-19 pandemic is causing enormous human and economic hardship in the United States and around the world. Economic activity and employment have picked up in recent months, but remain well below their levels at the start of the year. Lower demand and significantly lower oil prices curb consumer price inflation. General financial conditions have improved in recent months, in part due to policy measures aimed at supporting the economy and the flow of credit to US households and businesses. “While the Federal Reserve has gone to great lengths to make it clear that it is here for the long haul and will do whatever it takes, it was the publication of the September dot plot that gave market players the greatest clarity. As you can see from the graph above, voting members of the Federal Reserve have unanimously agreed to keep interest rates close to zero for the remainder of 2020 and 2021.
He reported that all but one voting member voted to keep interest rates where they were throughout 2022. With the exception of four voting members, the remaining members of the Federal Reserve voted to keep interest rates where they are in 2023. In other words, many members of the Federal Reserve do not anticipate an interest rate hike until the end of 2023.
In essence, the Federal Reserve has made it clear that it will keep its revised interest rate monetary policy close to zero and expects this action to continue until two events occur. First, labor market conditions return to “maximum employment”, and second, will not raise rates until after inflation has risen to 2% and “is on track to moderately exceed 2% for a while. time”.
The analysts’ predictions were correct. Bloomberg surveyed 31 economists in which they came to the following conclusion; “The Federal Reserve could keep interest rates close to zero for three years or more, and its balance sheet will exceed $ 10 trillion as policymakers seek to revive the US economy after the recession.”
The uncertainty about the actual schedule is no longer uncertain. The Federal Reserve continues to commit to doing everything in its power to revitalize the economy and move towards maximum jobs and it will be a long road to recovery.
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