The good and the less so
Weekly Cash Commentary
The Wall Street Journal publishes a Fed Statement Tracker that highlights the changes in the Federal Open Market Committee (FOMC) statement from meeting to meeting. The most recent one, from the FOMC meeting last week, had as many changes to the list of voters as it did in the body of the text because the membership of regional bank presidents rotated. In other words, not much difference.
But small changes can say a lot. Policymakers seemed to be expressing a "two steps back, one step forward" view of the economy. The statement mentions that the recovery will be driven by the progress of the Covid-19 vaccine rather than just by the spread of the virus itself. While this sounds like two ways of saying the same thing, one is forward looking and positive and the other is negative and backward-looking. True, the vaccine rollout has been slow and will take time to reach everyone. But it is good they officially acknowledged that it is happening to balance the point that the resurgence of the virus in the fall—whatever wave number you want to call it—slowed the recovery since the FOMC last met in December. Leisure & hospitality was especially hard hit due to losing the crucial holiday season. In the end, they left monetary policy unchanged and extremely accommodative. The spigot is wide open as the Fed continues to purchase government securities to the tune of $120 billion a month and hold overnight rates low.