The Federal Open Market Committee of the United States (FOMC) held a regular meeting on Wednesday 28 July. US central bank announces it has made ‘progress’ towards its inflation and employment goals.
- The Federal Reserve is seeking to use its full range of instruments to support the US economy. With progress in vaccination and strong political support, indicators of economic activity and activity continue to improve. Inflation has increased due to transition factors.
- The unemployment rate, for instance, rests at just below 6%, compared to 3.5% before the pandemic. Moreover, the Fed believes the recent inflation numbers, while noticeable, are transitory and will fade over time
- 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
- The committee decided to keep the target range for federal fund rates at 0 to 0.25%.
- 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
- The Fed also announced the establishment of two permanent facilities that would allow eligible domestic and foreign market participants to swap Treasuries and other short-term securities for cash
FED Chairman Jerome Powell:
- According to Financial Times, Monetary policy will remain supportive until full economic recovery
- “Inflation is much higher than our target. Inflation could be stronger and more resilient than forecast. If the rate of inflation significantly and sustainably goes beyond the target level, the Fed will be ready to make policy adjustments.”
- “I think we’re a ways away from having had substantial further progress toward the maximum employment goal — I would want to see some strong job numbers,”
- “We expect further progress, and we expect that if things go well then we will reach that goal,” Powell said. “And when we reach it, and the committee is comfortable that we have reached it, then we’ll taper at that point.”