By Tom Burnett CFA As expected, on November 5, 2020, the Federal Reserve Open Market Committee issued its formal decision to maintain the current low interest rates policy. The 12-member Committee voted unanimously to keep the Fed funds rate in the range between zero and one-quarter percent. The Fed also stated that it would continue to manage the flow of funds in an “accommodative” way. The inflation goal of 2% per year can be achieved by using average rates over a long time period. Essentially, the Fed is clearly stating that inflation rates above 2% will be tolerated until the economy recovers from the COVID-19 induced consequences. Similarly, the Fed reaffirmed its intention to keep purchasing Treasuries, mortgages and municipal securities in a manner that will allow those markets to remain liquid. The Fed is certainly doing its part to help the economy. The latest Fed balance sheet shows total assets of $7.2 trillion, up from $4.1 trillion one year ago.
The next FOMC meeting is scheduled for December 15-16 with a Statement issued on December 16.
Tom Burnett CFA. Is Director of Research