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January 26, 2022US MONETARY POLICY At its scheduled Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced that it would keep the target range for the federal funds rate at 0 to 0.25 per cent. Based on inflation well above 2.0% range and strong labour market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.
The Committee also decided to continue to reduce the monthly pace of its net asset purchases and bring them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion (previously $40 billion) per month and of agency mortgage‑backed securities by at least $10 billion per month (previously $20 billion).
US economic activity and employment have continued to strengthen, supported by wider vaccination rollouts and strong policy support. While the hardest hit sectors continue to be affected by the pandemic, recent indicators point an improvement in these sectors. With solid employment gains, the unemployment rate has declined.
Inflation is elevated, reflecting supply and demand imbalances and the reopening of the economy. The United States Consumer Price Index for All Urban Consumers increased 7.0 per cent year-over-year in December 2021. On an annual basis, the consumer price index rose 4.7% on average in 2021.
The Federal Reserve noted that the path of economic recovery continues to depend on the course of the pandemic. Progress on vaccinations and easing of supply chain constraints are expected to support employment and economic growth while contributing to a decline in inflation.
The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate. The next scheduled FOMC meeting will be held on March 15/16, 2022. A summary of updated economic projections will be provided at the same time.
Source: US Federal Reserve, FOMC Statement
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