OPINION
Market Rating Before FOMC MeetingJan 31
FOMC: Not the Time to Raise Rates
FOMC 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. The Committee also noted that it will begin winding down its monthly asset purchases later this month at a pace of $15 billion per month.
Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month.
"The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook," FOMC statement noted. It was also reported that sectors most adversely affected by the pandemic have improved in recent months, but the summer's rise in COVID-19 cases has slowed their recovery.
In the press conference, Chair Jerome Powell stated that supply bottlenecks may last longer than expected, and if they see signs that inflation is persistently going higher than they want, they can make policy adjustments, but they will be patient about raising rates. Emphasizing the Covid-19 pandemic is delaying the economic recovery, Powell added that demand is strong and predicted that the recovery may improve as case numbers decline.
Noting that inflation continues above the average 2 percent target, the Chair said that there will be moderation as the economic recovery is achieved and that they believe it will reach the target. Adding that they have conducted research on how climate changes affect the economy and will do their part on climate change, Powell further noted that it is not the time to increase interest rates right now, but if they need to increase interest rates, they will be patient and will not hesitate to back down.
A significant decrease in international investor stress was the case as the reduction of asset purchases was not an early signal of tightening, and the Federal Open Market Committee's statement satisfied the markets. VIX declined to 15 points, and SP500 index, which is the leader of the global stocks, set a new record at 4 671 and NQ100, known as the technology index, also set a new record with 16 229.
Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month.
"The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook," FOMC statement noted. It was also reported that sectors most adversely affected by the pandemic have improved in recent months, but the summer's rise in COVID-19 cases has slowed their recovery.
In the press conference, Chair Jerome Powell stated that supply bottlenecks may last longer than expected, and if they see signs that inflation is persistently going higher than they want, they can make policy adjustments, but they will be patient about raising rates. Emphasizing the Covid-19 pandemic is delaying the economic recovery, Powell added that demand is strong and predicted that the recovery may improve as case numbers decline.
Noting that inflation continues above the average 2 percent target, the Chair said that there will be moderation as the economic recovery is achieved and that they believe it will reach the target. Adding that they have conducted research on how climate changes affect the economy and will do their part on climate change, Powell further noted that it is not the time to increase interest rates right now, but if they need to increase interest rates, they will be patient and will not hesitate to back down.
A significant decrease in international investor stress was the case as the reduction of asset purchases was not an early signal of tightening, and the Federal Open Market Committee's statement satisfied the markets. VIX declined to 15 points, and SP500 index, which is the leader of the global stocks, set a new record at 4 671 and NQ100, known as the technology index, also set a new record with 16 229.
