Federal Reserve Maintains Current Accommodative Policies

By Tom Burnett CFA
On July 28, 2021, the Federal Reserve released in public statement following a two-day July meeting. The Fed remains committed to a policy of low rates and material asset purchases until the U.S. economy recovers to its pre-Covid-19 levels. The Statement noted that employment is recovering but still is several million jobs shy of the pre-Covid levels. The economy is recovering and vaccinations are the key element, so the Fed will maintain its ‘easy’ money posture until the job creation goals are met. The goal of 2% inflation will allow for ‘over shooting’ if necessary since the Fed believes the current inflationary pressures are transitory and not permanent.
In addition, the Fed will continue to purchase $120 billion per month of Treasury ($80 billion) and mortgage-backed securities ($40 billion) until such time as full employment has been reached. The Statement did not give any hints as to the curtailment of the monthly bond purchasing activity.
The basic short-term rate band remains 0-0.25% for the fed funds rate with no suggestion as to when that range will be changed.
The Statement today was issued by a unanimous vote.
The next Fed FOMC meeting will be September 21-22.

Tom Burnett CFA is Director of Research