Inflationary risk and the delta variant of the coronavirus will be front and center at next week’s meeting of the Federal Open Market Committee, while policy changes will take a back seat. The primary takeaways of the meeting, should there actually be anything other than a reaffirmation of the status quo, will be the inclusion of policymakers noting the ... READ MORE >
FOMC
CHART OF THE DAY: Yield spread flattens as inflation trade unwinds
The Federal Open Market Committee unleashed a sharp change in market expectations following its Wednesday meeting, helping to curtail inflation fears. The idea of the first rate hike being pulled forward into 2023 with a possibility of 2022 elicited a change in the inflation trade and a resetting of market expectations of inflation. While the initial ... READ MORE >
A 2021 ‘taper tantrum’? Not likely, but requires monitoring
Over the past month, there has been much speculation by financial market participants that the Federal Reserve is preparing to pare back or change the outright composition of its $120 billion in monthly asset purchases—$80 billion in treasuries and $40 billion in mortgage-backed securities—that have damped rates along the entire maturity spectrum as well as ... READ MORE >
CHART OF THE DAY: Fed projects U.S. will reach pre-pandemic goals by end of 2022
The Federal Open Market Committee’s quarterly projections for economic growth, unemployment and inflation suggest the economy will be back on track and meeting pre-pandemic expectations by the end of 2022. This should play a role in resetting interest rate expectations by professional investors and firm managers over the next 18 months. The median ... READ MORE >
FOMC preview: You can’t always get what you want
The Federal Open Market Committee’s decision on the federal funds rate Wednesday will for the most part be a non-market-moving event, with the Federal Reserve looking to convey a consistent outlook on the direction of policy and rates. While investors will be looking for an upgrade to the economic assessment, which they will receive, they will not ... READ MORE >
FOMC comment: Fed follows through on its policy shift
The Federal Reserve followed through on its update of its long-run monetary framework, stating quite transparently on Wednesday that the policy-setting Federal Open Market Committee “will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%. The ... READ MORE >
FOMC rate decision: Waiting on September
The U.S. economy has largely moved sideways with a downward tilt over the past month as pent-up demand waned and lower- and middle-income households pulled back on spending in anticipation of a reduced pace of fiscal aid. The Federal Reserve used its policy statement and Chairman Jerome Powell his news conference on Wednesday to underscore its ... READ MORE >
Monetary policy in an era of pandemic economics
The Federal Reserve has moved the federal funds rate to the zero bound in a series of swift responses to the outbreak of the coronavirus and the market’s anticipation of the shock to economic growth and market stability. The Fed has put together nine different lending facilities and put forward liquidity commitments that run in the trillions. While we ... READ MORE >
Federal Reserve brings dovish tint to statement as consumption downgraded
The Federal Reserve Open Market Committee attempted to thread the needle in its January meeting by maintaining its existing policy rate while acknowledging moderating real consumption. The FOMC policy statement implied a coming downward revision to the summary of economic projections at the March meeting on the back of a change in its language around real ... READ MORE >
Expect the Fed to stick to the script
We expect the Federal Reserve will keep its policy rate in a range between 1.50% and 1.75% at the December FOMC meeting on Tuesday and Wednesday. The major interest of investors and policymakers will naturally be the movement in the dot plot, which we expect to move into alignment with the current policy rate, with 2020 to the midpoint of the current target ... READ MORE >