Federal Reserve Will Maintain Current Accommodative Policy

By Tom Burnett CFA

On March 17, 2021, the Federal Reserve concluded its two-day March meeting with a series of announcements. Included in the public statement was a revised set of economic projections. The Fed now expects 2021 real GDP growth of 6.5%, up from an earlier projection of 4.3%. Inflation is now seen to average 2.2% in 2021, above the previous forecast of 1.8%. The unemployment rate is projected to average 4.5% this year, down from an earlier forecast of 5.0%.
The Fed will seek to maintain low rates at a range of 0%-0.25%, but four members of the Open Market Committee now see rates rising in 2022. Seven members now see rates rising in 2023. Inflation is now thought to rise to 2.4% by the end of this year, before falling back in 2022.
The Fed will continue with its bond purchase programs—$80 billion of Treasuries and $40 billion of mortgage related securities each month. It will also reinvest any proceeds it receives from securities that are maturing.
The Fed decisions on interest rates and bond purchases were unanimous.
Tom Burnett CFA is Director of Research