Members of the Federal Reserve System left the base interest rate unchanged at the level of 0.00 – 0.25%, noting a moderate recovery of the US economy. In terms of using all available tools to support the economy during the COVID-19 pandemic, the statement remained unchanged. The committee will support a bond purchase program with the amount of $120 billion monthly until significant progress is made on employment and inflation. The composition of the redeemable bonds hasn’t been changed.
The Federal Reserve has changed the formulation about the pace of economic recovery, based on the latest data on US employment. In December, indicators fell for the first time since April, and retail sales fell for the third consecutive month amid renewed outbreaks across the country.
At a press conference, Jerome Powell pointed to the close connection between the pace of economic recovery and vaccination of the population. And he also denied the involvement of the Fed in “blowing bubbles” in the stock market. According to him, monetary policy wasn’t a driver of asset prices growth. The stock market was under pressure from vaccination expectations and fiscal stimulus.
Against the background of new statements, the 2-year bonds yield remained almost unchanged, remaining at the level of 0.120%. The 10-year bonds yield fell slightly to 1.020% from the day’s high of 1.050%. The S&P 500 lost 2.90%, falling to 3.730.
Main market quotes:
- S&P 500 (F) 3,735.38 -107.12 (-2.79%)
- Dow Jones 30,252.61 -684.43 (-2.21%)
- DAX 13,620.46 -250.53 (-1.81%)
- FTSE 100 6,567.37 -86.64 (-1.30%)
- USD Index 90,662 +0.514 (+0.57%)
