Federal Reserve Leaves Rates Unchanged, Taper Pace Unchanged in Measured Response as Expected

The Federal Reserve kept rates unchanged at their January meeting, The QE Taper pace left unchanged, scheduled to end in March as expected. Fed says it expects that it will soon be appropriate to raise the target range. Risks to the economic outlook remain, including from new variants of the virus. Dot plot shows four hikes in 2022 vs four hikes expected

Fed Boardroom

Federal Reserve FOMC Statement 

Federal Reserve Announcement, Wednesday 26 January 2021 14:00:00 ET

FOMC Benchmark Interest Rate Target Range UNCH .00-0.25%

Interest Rate On Excess Reserves IOER UNCH 15 bps

Conference To Follow At 2.30 ET PM With Chairman Powell

Highlights

  • Rates left unchanged at 0-0.25%
  • Taper pace left unchanged, scheduled to end in March
  • Taper was not expected to be sped up
  • Fed says it expects that it will soon be appropriate to raise the target range
  • Risks to the economic outlook remain, including from new variants of the virus.
  • The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals

January 26 22 FOMC STATEMENT CHANGES via @Newsquawk

The full statement from the January 2022 Fed Decision

Indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months but are being affected by the recent sharp rise in COVID-19 cases. Job gains have been solid in recent months, and the unemployment rate has declined substantially. Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy continues to depend on the course of the virus. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. Risks to the economic outlook remain, including from new variants of the virus.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate. The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month. The Federal Reserve’s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Esther L. George; Patrick Harker; Loretta J. Mester; and Christopher J. Waller. Patrick Harker voted as an alternate member at this meeting.

FOMC Dot Plot and Central Tendencies from December 2021

Fed Monetary Policy Outlook

Federal Reserve issues FOMC statement January 22, 2021

Implementation Note issued January 26, 2021

Source: Federal Reserve

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