- There was little change from the Federal Reserve Open Market Committee (FOMC) today as members voted to keep the policy rate at the current 0% to 0.25% range. The statement re-emphasized that the Fed is committed to use its “full range of tools to support the U.S. economy in this challenging time.”
- Today’s policy statement described economic conditions as largely unchanged from mid-September. Though the recovery has continued over previous months, there are still downside risks due to the increase in covid-19 infections across the U.S. The statement made specific mention of the “tremendous human and economic hardship across the United States and around the world” attributable to the virus.
- The Committee also reiterated that it is ready to increase monetary policy support “if risks emerge that could impede the attainment of the Committee’s goals” of maximum employment and price stability.
- All of the members of the FOMC voted in favor of the decision.
Key Implications
- With COVID-19 infections rising across the U.S., the economic outlook is uncertain. The Fed recognized the fragility of the economy and remained consistent in its message that it is not letting off the monetary policy gas pedal until the recovery is much more entrenched.
- Over the last few months, Fed members have been vocal about the need for fiscal policy, which would speed up the economic recovery. With the presidential election still undecided, this is still highly uncertain, but should policy makers find a way to strike a deal, we would expect the Fed to alleviate the pressure of rising Treasury issuance by buying a greater quantity of Treasury debt.
- Today’s statement hasn’t changed our outlook. The Fed is years away from hiking rates. It will continue to actively buy U.S. government debt to keep yields low. This will keep borrowing costs for households and businesses close to historically low levels for the indefinite future.
