See you next year
Perhaps due to fiscal stimulus talks, the FOMC meeting was quiet.
Today’s Federal Open Market Committee (FOMC) meeting marked a quiet end to a particularly challenging year. Although some had expected the Federal Reserve to change the composition of its asset purchases toward longer maturities, the FOMC opted to take a more gentle, qualitative approach at this time. In addition to keeping the official target range unchanged, the Fed adopted additional forward guidance with respect to its ongoing asset purchases. It will continue to increase its holdings at the current pace, “until substantial further progress has been made toward its employment and inflation goals.”
While committee members had a more favorable outlook for the overall economy and the unemployment rate in the most recent dot plot as compared with the previous one in September, their expectations for inflation continued to fall shy of the 2% target until the end of 2023. As a result, today’s “dot plot” showed that all FOMC participants expect the fed funds rate to remain at present levels through the end of next year. All but one participant extended that forecast through the end of 2022. And only five participants thought the rate could be higher by the end of 2023—one more vote than in the previous dot plot. It is possible the ongoing fiscal negotiations in Congress influenced the Fed to curtail action today, as during the press conference Chair Powell remarked that the case for additional fiscal support is “very, very strong,” the need for it is widely understood and that the details are up to Congress.