FEDERAL OPEN MARKET COMMITTEE (FOMC) MEETING RESULTS:
DATE: January 25, 26 2022 | MEETING LOCATION: Virtual
- 1Fed pledges to use full range of tools to assist the economy. The Fed did not changerates - it keeps interest rate range at 0.0% - 0.25%.
- 2The Fed gave a hint that it will begin to increase its policy rate soon (March 2022 FOMC meeting?)
- 3Fed claims that progress on Covid vaccinations has helped, and the economy is much strongerbecause of it.
- 4The Federal Reserve announced that it will speed up the taper of its bond buying. Bond buyingto end by March of 2022.
- 5FOMC give policy guidance on the futrue size of its balance sheet.
ECONOMIC HIGHLIGHTS: Job growth and economic activity continue to strengthen, but inflation is high.
- "Indicators of economic activity and employment have continued o strengthen. The sectors mostadversely affected by the pandemic have improved in recent months but are being affect by therecent 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 havecontinued to contribute to elevated levels of inflation.
- Overall financial conditions remain accommodative, in part reflecting policy measures to supportthe 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 vaccinationsand an easing of supply constraints are expected to support continued gains in economic activityand employment as well as a reduction in inflation. Risks to the economic outlook remain, includingfrom new variants of the virus."
ANNOUNCEMENTS: Fed funds rate unchanged. Fed funds range remains at 0.0% - 0.25%, but suggests higher rates are on the way. Plus, the Fed will accelerate the reduction of monthly securities purchases. Bond bying to end in March 2022.
- "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.
- Beginning in January, the Committee will increase its holdings of Treasury securities by at least $40 billion per month and of agency mortgage-backed securities by at least $20 billion per month.
- 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.
- The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 0.15 percent, effective January 27, 2022.
- The Federal Open Market Committee agreed that it is appropriate at this time to provide information regarding its planned approach for significantly reducing the size of the Federal Reserve's balance sheet. All participants agreed on the following elements:
- The Committee views changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy.
- The Committee will determine the timing and pace of reducing the size of the Federal Reserve's balance sheet so as to promote its maximum employment and price stability goals.
- The Committee expects that reducing the size of the Federal Reserve's balance sheet will
commence after the process of increasing the target range for the federal funds rate has
- The Committee intends to reduce the Federal Reserve's securities holdings over time in a
predictable manner primarily by adjusting the amounts reinvested of principal payments
received from securities held in the System Open Market Account (SOMA).
- Over time, the Committee intends to maintain securities holdings in amounts needed to
implement monetary policy efficiently and effectively in its ample reserves regime.
- In the longer run, the Committee intends to hold primarily Treasury securities in the SOMA,
thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across
sectors of the economy.
- The Committee is prepared to adjust any of the details of its approach to reducing the size
of the balance sheet in light of economic and financial developments.
VOTING RESULTS: No dissenting votes
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.
NEXT MEETING: March 15 - 16, 2022
ABOUT THE AUTHOR
Dr. Edmond J. Seifried, PhD | Chief Economist
Dr. Seifried is Professor Emeritus of Economics and Business at Lafayette College in Easton, Pennsylvania. He also serves as the Chief Economist for SB Value Partners, L.P., and Executive Consultant for the Sheshunoff CEO Affiliation Programs.
Dr. Seifried serves as the dean of the Virginia and West Virginia Banking Schools and has served on the faculty of numerous banking schools including: Stonier Graduate School of Banking, and the Graduate School of Banking of the South.