In a Nutshell: “The pace of the recovery in economic activity and employment has moderated in recent months.”
Decision: Fed funds rate target range remains at 0% to 0.25%.
The Federal Open Market Committee, and in particular Chair Jerome Powell, wants to make one thing very clear: The economy cannot get back to normal until the virus is licked. If there was a theme in today’s statement and press conference, that was it. Yes, the statement noted that the recovery has weakened, but the key points was that the “… weakness (was) concentrated in the sectors most adversely affected by the pandemic.”
The statement then went on to note that: “The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.” During his press conference, Chair Powell reiterated those points.
And there was one other key bit of information from his press conference that needs to be highlighted. He made it clear that the Fed was prepared to overdo it rather than risk not staying accommodative long enough. He said the costs of not getting back to full employment are much greater than the possibility of getting high inflation, something he said was not very likely. That’s another way of saying rates will be kept low and asset purchases will continue for a very, very long time.
So, barring an unforeseen crisis, when it comes to the Fed, what you see now is what you are going to get for probably two or more years.
(The next FOMC meeting is March 16,17 2021.)