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July 28, 2021US 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. The Committee expects to maintain this target rate until labour market conditions are at levels that are consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 per cent and is on track to moderately exceed 2 per cent for a period so that inflation averages 2 per cent over time.
The Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month. These asset purchases were expected to continue this until substantial progress has been made towards the goals of maximum employment and price stability. The Federal Reserve noted that progress has been made towards these goals, and it will continue to assess progress in coming meetings.
Economic recovery in the United States (US) has gained momentum with progress on vaccinations and continued policy support. While activity in the sectors that rely on personal interactions has improved, it is still not fully recovered. Inflation has also increased in recent months, but the Federal Reserve notes that this uptick is mostly due to transitory factors. Financial conditions remain supportive given the accommodative policy measures in place to support economic growth and the flow of credit to households and businesses.
It is expected that progress on vaccine rollout will help lift the containment measures and reduce the impacts of the pandemic on the economy, but the path of the recovery is still dependent on the course of the pandemic.
The Committee noted that it will continue to monitor the economic situation and is prepared to adjust the monetary policy as needed to achieve maximum employment and inflation at 2 percent over the longer run. The next scheduled FOCM meeting will be held on September 21/22, 2021.
Source: US Federal Reserve, FOMC Statement
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