{"id":1756,"date":"2020-06-10T16:13:35","date_gmt":"2020-06-10T20:13:35","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1756"},"modified":"2020-06-10T16:13:35","modified_gmt":"2020-06-10T20:13:35","slug":"june-910-20-fomc-meeting","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1756","title":{"rendered":"June 9,10 \u201820 FOMC Meeting"},"content":{"rendered":"\n

In a Nutshell:<\/strong>  \u201cThe ongoing public health crisis will weigh\nheavily on economic activity, employment, and inflation in the near term, and\nposes considerable risks to the economic outlook over the medium term.\u201d<\/em><\/strong><\/p>\n\n\n\n

Decision:<\/em><\/strong> Fed funds rate target range remains at 0% to 0.25%.\n<\/em><\/p>\n\n\n\n

The\nFed kept rates close to zero today.  But\nthat was not a surprise.  What observers\nwere looking for was the tone of the message and the hints the members were sending\nas to how aggressive they will be going forward.  Put simply, it\u2019s pedal to the metal for quite\na long time.<\/p>\n\n\n\n

During\nhis press conference, Fed Chair Powell made it clear that there is no timeframe\nfor when the central bank will move off of its aggressive, low rate\npolicy.  As the report states: \u201cThe Committee expects to maintain this\ntarget range until it is confident that the economy has weathered recent events\nand is on track to achieve its maximum employment and price stability goals.\u201d  <\/em><\/p>\n\n\n\n

But\nthat was just a repeat of past statements. \nMore important was the comment that the virus could impact the economy\nnot just in the short-term but over the next two years as well (the\nmedium-term). Indeed, the economic projections have the funds rate at 0.1%\nthrough 2022.  <\/p>\n\n\n\n

And\nthe Fed is confident that it can keep rates down for an extending period of\ntime because recent experience.  Mr.\nPowell stated and restated in his press conference that despite unemployment\nrates at historically low levels for an extended period, inflation remained\ncontained.  To me, that is saying that\nrates don\u2019t have to go anywhere until we are at full employment and that could\ntake years to reach.  <\/p>\n\n\n\n

While\nthe Fed has made it clear that rates will be low for a very long time, which is\ngood for liquidity and equity prices, we have a long way to go before we get\nback to where the economy was before the pandemic hit.  The forecasts for economic growth over the\nnext three years (-6.5% in 2020, +5% in 2021 and +3.5% in 2022) imply that we\nwill not see GDP at where it was at the end of 2019 until roughly the middle of\n2022 \u2013 two years from now!  The\nunemployment rate is still expected to be in the 5.5% range in the fourth\nquarter of 2022, compared to 3.5% in February of this year.  Those forecasts are hardly great for\nearnings, especially given how far the markets have come since the bottom in\nMarch.<\/p>\n\n\n\n

So,\nwhen it comes to equities, investors need to ponder this key question: Will\nliquidity or economics reign? <\/p>\n\n\n\n

 (The\nnext FOMC meeting is July 28,29 2020.)  <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In a Nutshell:  \u201cThe ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.\u201d Decision: Fed funds rate target range remains at 0% to 0.25%. The Fed kept rates close to zero today.  But that was … Continue reading June 9,10 \u201820 FOMC Meeting<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1756","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1756","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1756"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1756\/revisions"}],"predecessor-version":[{"id":1757,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1756\/revisions\/1757"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}