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November 03, 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.
With the economic progress made over the past year, the FOMC decided to start reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month. It is expected that similar reductions in the pace of net asset purchases will be appropriate each month based on market conditions.
US economic activity and employment continued to strengthen, supported by wider vaccination rollouts and strong policy stimulus. While the increase in the number of COVID-19 cases during the summer slowed down recovery in the sectors most adversely impacted by the pandemic, recent economic indicators point to a improvement in those sectors in recent months.
Inflation is elevated, reflecting largely factors that are expected to by transitory. The United States Consumer Price Index for All Urban Consumers increased 5.4% year-over-year in September. Supply and demand imbalances combined with pent-up demand following reopening of the economy have contributed to price increases in some sectors as well.
The Federal Reserve noted that the path of economic recovery continues to depend on the course of the pandemic. The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate. The next scheduled FOCM meeting will be held on December 14/15, 2021. An updated Summary of Economic Projections will be provided at that meeting.
Source: US Federal Reserve, FOMC Statement
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