By Tom Burnett CFA
On January 27, 2021, the Federal Reserve Open Market Committee issued a strong statement in support of the Board’s “easy” monetary policies. The FOMC voted unanimously to continue its low-interest rate stance. The Board is targeting an inflation rate averaging 2% over a measurable period. Inflation remains well below this target level so the Fed response begins with an unchanged fed funds rate between zero and 1/4 %. In addition, the Fed will continue to purchase $80 billion of Treasury securities and $40 billion of mortgage-related securities every month. The Fed will also roll over any maturing securities so that its inventories will not decline. As needed, the Fed stated clearly that it will continue to supply liquidity to the commercial paper, money-market funds, and municipal markets.
The Fed has certainly done its part to help stabilize the COVID-19 ravaged economy. The latest Fed balance sheet shows total assets of $7.35 trillion, up sharply from the $4.37 trillion level of one year ago.
Tom Burnett CFA is Director of Research