Written by Steven Hansen
The Federal Reserve’s meeting statement included no rate change (as it is already at zero), and dealt mostly with inflation and targets:
…. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. …..
Analyst Opinion of the FOMC Meeting Minutes
There was significant dissent from two FOMC members this month. At the end of this post, there are economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy.
Also at the end of this post is the Statement Regarding Treasury Securities, Agency Mortgage-Backed Securities, and Agency Commercial Mortgage-Backed Securities Operations from the New York Fed.
The Meeting Minutes
Econoday consensus forecast was for no change to the Federal Funds rate. See the end of the post for the economic projects of the FOMC members.
29 July Statement | 16 September Statement |
|---|---|
The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. | The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. |
| The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. | The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. |
The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate. | The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments. |
| Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles | Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Loretta J. Mester; and Randal K. Quarles. Voting against the action were Robert S. Kaplan, who expects that it will be appropriate to maintain the current target range until the Committee is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals as articulated in its new policy strategy statement, but prefers that the Committee retain greater policy rate flexibility beyond that point; and Neel Kashkari, who prefers that the Committee to indicate that it expects to maintain the current target range until core inflation has reached 2 percent on a sustained basis. |
September 16, 2020: FOMC Projections materials:
Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, September 2020
Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes
Percent
| Variable | Median1 | Central Tendency2 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2021 | 2022 | 2023 | Longer run | 2020 | 2021 | 2022 | 2023 | Longer run | |
| Change in real GDP | -3.7 | 4.0 | 3.0 | 2.5 | 1.9 | -4.0–3.0 | 3.6-4.7 | 2.5-3.3 | 2.4-3.0 | 1.7-2.0 |
| June projection | -6.5 | 5.0 | 3.5 | 1.8 | -7.6–5.5 | 4.5-6.0 | 3.0-4.5 | 1.7-2.0 | ||
| Unemployment rate | 7.6 | 5.5 | 4.6 | 4.0 | 4.1 | 7.0-8.0 | 5.0-6.2 | 4.0-5.0 | 3.5-4.4 | 3.9-4.3 |
| June projection | 9.3 | 6.5 | 5.5 | 4.1 | 9.0-10.0 | 5.9-7.5 | 4.8-6.1 | 4.0-4.3 | ||
| PCE inflation | 1.2 | 1.7 | 1.8 | 2.0 | 2.0 | 1.1-1.3 | 1.6-1.9 | 1.7-1.9 | 1.9-2.0 | 2.0 |
| June projection | .8 | 1.6 | 1.7 | 2.0 | 0.6-1.0 | 1.4-1.7 | 1.6-1.8 | 2.0 | ||
| Core PCE inflation4 | 1.5 | 1.7 | 1.8 | 2.0 | 1.3-1.5 | 1.6-1.8 | 1.7-1.9 | 1.9-2.0 | ||
| June projection | 1.0 | 1.5 | 1.7 | 0.9-1.1 | 1.4-1.7 | 1.6-1.8 | ||||
| Memo: Projected appropriate policy path | ||||||||||
| Federal funds rate | .1 | .1 | .1 | .1 | 2.5 | 0.1 | 0.1 | 0.1 | 0.1-0.4 | 2.3-2.5 |
| June projection | .1 | .1 | .1 | 2.5 | 0.1 | 0.1 | 0.1 | 2.3-2.5 | ||
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. The June projections were made in conjunction with the meeting of the Federal Open Market Committee on June 9-10, 2020. One participant did not submit longer-run projections for the change in real GDP, the unemployment rate, or the federal funds rate in conjunction with the June 9-10, 2020, meeting, and one participant did not submit such projections in conjunction with the September 15-16, 2020, meeting.
1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections is even, the median is the average of the two middle projections. Return to table
2. The central tendency excludes the three highest and three lowest projections for each variable in each year. Return to table
3. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year. Return to table
4. Longer-run projections for core PCE inflation are not collected. Return to table
Figure 1. Medians, central tendencies, and ranges of economic projections, 2020-23 and over the longer run
Change in real GDP
Percent
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 2.2 | 2.1 | 2.7 | 2.5 | 2.3 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 1.0 | 5.5 | 4.5 | 4.0 | 2.2 |
| Upper End of Central Tendency | – | – | – | – | – | -3.0 | 4.7 | 3.3 | 3.0 | 2.0 |
| Median | – | – | – | – | – | -3.7 | 4.0 | 3.0 | 2.5 | 1.9 |
| Lower End of Central Tendency | – | – | – | – | – | -4.0 | 3.6 | 2.5 | 2.4 | 1.7 |
| Lower End of Range | – | – | – | – | – | -5.5 | .0 | 2.0 | 2.0 | 1.6 |
Unemployment rate
Percent
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | 5.0 | 4.8 | 4.1 | 3.8 | 3.5 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 8.0 | 8.0 | 7.5 | 6.0 | 4.7 |
| Upper End of Central Tendency | – | – | – | – | – | 8.0 | 6.2 | 5.0 | 4.4 | 4.3 |
| Median | – | – | – | – | – | 7.6 | 5.5 | 4.6 | 4.0 | 4.1 |
| Lower End of Central Tendency | – | – | – | – | – | 7.0 | 5.0 | 4.0 | 3.5 | 3.9 |
| Lower End of Range | – | – | – | – | – | 6.5 | 4.0 | 3.5 | 3.5 | 3.5 |
PCE inflation
Percent
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Longer run | |
|---|---|---|---|---|---|---|---|---|---|---|
| Actual | .2 | 1.6 | 1.8 | 2.0 | 1.5 | – | – | – | – | – |
| Upper End of Range | – | – | – | – | – | 1.5 | 2.4 | 2.2 | 2.1 | 2.0 |
| Upper End of Central Tendency | – | – | – | – | – | 1.3 | 1.9 | 1.9 | 2.0 | 2.0 |
| Median | – | – | – | – | – | 1.2 | 1.7 | 1.8 | 2.0 | 2.0 |
| Lower End of Central Tendency | – | – | – | – | – | 1.1 | 1.6 | 1.7 | 1.9 | 2.0 |
| Lower End of Range | – | – | – | – | – | 1.0 | 1.3 | 1.5 | 1.7 | 2.0 |
Note. Definitions of variables and other explanations are in the notes to table 1. The data for the actual values of the variables are annual.
Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate
Number of participants with projected midpoint of target range or target level
| Midpoint of target range or target level (Percent) | 2020 | 2021 | 2022 | 2023 | Longer run |
|---|---|---|---|---|---|
| 3.125 | |||||
| 3.000 | 2 | ||||
| 2.875 | |||||
| 2.750 | 1 | ||||
| 2.625 | |||||
| 2.500 | 8 | ||||
| 2.375 | 1 | ||||
| 2.250 | 3 | ||||
| 2.125 | |||||
| 2.000 | 1 | ||||
| 1.875 | |||||
| 1.750 | |||||
| 1.625 | |||||
| 1.500 | |||||
| 1.375 | 1 | ||||
| 1.250 | |||||
| 1.125 | |||||
| 1.000 | |||||
| 0.875 | |||||
| 0.750 | |||||
| 0.625 | 1 | 1 | |||
| 0.500 | |||||
| 0.375 | 2 | ||||
| 0.250 | |||||
| 0.125 | 17 | 17 | 16 | 13 | |
| 0.000 |
Note. Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant did not submit longer-run projections for the federal funds rate.
Explanation of Economic Projections Charts
The charts show actual values and projections for three economic variables, based on FOMC participants’ individual assessments of appropriate monetary policy:
- Change in Real Gross Domestic Product (GDP)-as measured from the fourth quarter of the previous year to the fourth quarter of the year indicated.
- Unemployment Rate-the average civilian unemployment rate in the fourth quarter of each year.
- PCE Inflation-as measured by the change in the personal consumption expenditures (PCE) price index from the fourth quarter of the previous year to the fourth quarter of the year indicated.
Information for these variables is shown for each year from 2015 to 2023, and for the longer run.
The solid blue line, labeled “Actual,” shows the historical values for each variable.
The solid red lines depict the median projection in each period for each variable. The median value in each period is the middle projection when the projections are arranged from lowest to highest. When the number of projections is even, the median is the average of the two middle projections.
The range and central tendency for each variable in each projection period are depicted in “box and whiskers” format. The blue connected horizontal and vertical lines (“whiskers”) represent the range of the projections of policymakers. The bottom of the range for each variable is the lowest of all of the projections for that year or period. Likewise, the top of the range is the highest of all of the projections for that year or period. The light blue shaded boxes represent the central tendency, which is a narrower version of the range that excludes the three highest and three lowest projections for each variable in each year or period.
The longer-run projections, which are shown on the far right side of the charts, are the rates of growth, unemployment, and inflation to which a policymaker expects the economy to converge over time-maybe in five or six years-in the absence of further shocks and under appropriate monetary policy. Because appropriate monetary policy, by definition, is aimed at achieving the Federal Reserve’s dual mandate of maximum employment and price stability in the longer run, policymakers’ longer-run projections for economic growth and unemployment may be interpreted, respectively, as estimates of the economy’s normal or trend rate of growth and its normal unemployment rate over the longer run. The longer-run projection shown for inflation is the rate of inflation judged to be most consistent with the Federal Reserve’s dual mandate.
Explanation of Policy Path Chart
This chart is based on policymakers’ assessments of appropriate monetary policy, which, by definition, is the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her interpretation of the Federal Reserve’s dual objectives of maximum employment and stable prices.
Each shaded circle indicates the value (rounded to the nearest â…› percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run.
Source: All minutes and statement index/calendar for the Federal Reserve
Statement Regarding Treasury Securities, Agency Mortgage-Backed Securities, and Agency Commercial Mortgage-Backed Securities Operations
September 16, 2020
Effective September 16, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to continue to increase the System Open Market Account (SOMA) holdings of Treasury securities and agency mortgage-backed securities (MBS) at the current pace. The FOMC also directed the Desk to increase holdings of Treasury securities and agency MBS by additional amounts, and purchase agency commercial mortgage-backed securities (CMBS), as needed to sustain smooth functioning of markets for these securities.
Consistent with this directive, the Desk plans to continue to increase SOMA holdings of Treasury securities by approximately $80 billion per month. Treasury purchases will continue to be conducted across a range of maturities and security types. The Desk will continue to roll over at auction all principal payments from SOMA holdings of maturing Treasury securities. Information on purchase amounts and schedules can be found on the Treasury Securities Operational Details page.
Similarly, the Desk plans to continue to increase SOMA holdings of agency MBS by approximately $40 billion per month. Agency MBS purchases will continue to generally be concentrated in recently produced coupons in 30-year and 15-year fixed rate agency MBS in the To-Be-Announced market. The Desk will continue to reinvest principal payments from agency MBS and agency debt in agency MBS. Total monthly purchase amounts can be found on the Agency MBS Historical Operational Results and Planned Purchase Amounts page and operational schedules can be found on the Agency MBS Operation Schedule page.
In addition, the Desk plans to continue to conduct agency CMBS operations to sustain smooth functioning of the agency CMBS market. Purchases will continue to be secured primarily by multifamily home mortgages that are guaranteed fully as to principal and interest by Fannie Mae, Freddie Mac, and Ginnie Mae and that the Desk has determined are suitable for purchase. The amounts purchased will depend on the reasonableness of the prices offered. Agency CMBS principal payments will no longer be reinvested. Information on purchase amounts and schedules can be found on the Agency CMBS Operation Schedule page.
Additional information on Treasury, agency MBS, and agency CMBS purchases can be found in the following locations:
FAQs: Treasury Purchases »
FAQs: Agency MBS Purchases »
FAQs: Agency CMBS Purchases »
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