As Expected, The Federal Reserve Leaves Policies Unchanged at April Meeting

By Tom Burnett CFA

On April 28, 2021, the Federal Reserve announced that its Open Market Committee decided to leave its current policies unchanged. The range for the Fed Funds rate will remain 0-.25%. The Fed’s goals are full employment and inflation rates in the 2% area. If inflation overshoots, the Fed will eventually take action to raise rates, but not until it appears that the inflation rate is averaging 2.0% over a longer period.
In addition, the Fed intends to continue its $120 billion of monthly purchases of Treasury and agency-mortgage securities in an effort to enhance liquidity in the major financial markets. The Fed will also reinvest any proceeds from its holdings that mature over the near term. Since the Covid-19 outbreak began in early 2020, the Fed has increased its balance sheet from $4.2 trillion to over $7.5 trillion, as of the most recent balance sheet date. There was no hint or suggestion in the four-page press release that a change in accommodative policy is imminent.

Tom Burnett CFA is Director of Research