June 10, 2020
April 29, 2020
Statement·Presser·Minutes·Policy
Jerome H. Powell
June 10, 2020 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT
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. The virus and the measures taken to protect public health are inducing have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial Financial conditions and have impaired improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
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 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 continue to purchase increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities in at least at the amounts needed current pace to support 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 market conditions developments and is prepared to adjust its plans as appropriate.
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.
Implementation Note issued April 29, June 10, 2020
Our summary
What changed
- The statement now says the virus and protective measures 'have induced' sharp declines in activity and job losses, shifting from 'are inducing' to a past-tense description.
- Added that financial conditions have improved, partly due to policy measures supporting the economy and credit flows.
- The Fed will increase its holdings of Treasury and agency MBS 'at least at the current pace' over coming months, a more explicit commitment to ongoing purchases.
- The FOMC will 'closely monitor developments' instead of 'market conditions,' broadening its focus.
- The vote remained unanimous with the same 10 members.
Implications
The shift to past tense and the note on improved financial conditions suggest the FOMC sees the acute phase of the crisis as easing, while the commitment to maintain purchase pace signals sustained accommodation.
The broader monitoring language may indicate a willingness to adjust policy based on a wider set of indicators, not just market functioning.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2020 | 2021 | 2022 | Longer run | |
|---|---|---|---|---|
| Real GDP growth | -6.5 was 2.0 | 5.0 was 1.9 | 3.5 was 1.8 | 1.8 was 1.9 |
| Unemployment rate | 9.3 was 3.5 | 6.5 was 3.6 | 5.5 was 3.7 | 4.1 |
| PCE inflation | 0.8 was 1.9 | 1.6 was 2.0 | 1.7 was 2.0 | 2.0 |
| Core PCE inflation | 1.0 was 1.9 | 1.5 was 2.0 | 1.7 was 2.0 | |
| Federal funds rate | 0.1 was 1.6 | 0.1 was 1.9 | 0.1 was 2.1 | 2.5 |
Median projections of FOMC participants; previous: December.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
June December median December median
Scroll the chart sideways for the later years.
Implementation Note
The settings that put the decision into effect: the interest rate paid on reserves, the FOMC's instructions to the New York Fed's trading desk, and the discount rate. Changes are marked the same way as in the statement.
- The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on required and excess reserve balances at 0.10 percent, effective
April 30,June 11, 2020. - As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive: "Effective
April 30,June 11, 2020, the Federal Open Market Committee directs the Desk to: - Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.
- Increase the System Open Market Account holdings of Treasury securities, agency mortgage-backed securities (MBS), and agency commercial mortgage-backed securities (CMBS)
inat least at theamounts neededcurrent pace tosupport thesustain smooth functioning of markets for thesesecurities.securities, thereby fostering effective transmission of monetary policy to broader financial conditions. - Conduct term and overnight repurchase agreement operations to support effective policy implementation and the smooth functioning of short-term U.S. dollar funding markets.
- Conduct overnight reverse repurchase agreement operations at an offering rate of 0.00 percent and with a per-counterparty limit of $30 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.
- Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS and all principal payments from holdings of agency CMBS in agency CMBS.
- Allow modest deviations from stated amounts for purchases and reinvestments, if needed for operational reasons.
- Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
- In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 0.25 percent.
Press conference
June 10, 2020, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the May employment report was the biggest data surprise anyone can remember, illustrating the high uncertainty about the economic path.
- The chair said the Fed is "not even thinking about thinking about raising rates," and would welcome very low unemployment readings based on the last expansion's experience.
- The chair said the Fed's emergency lending powers are not spending powers and cannot grant money to particular beneficiaries, with direct fiscal support potentially needed for many borrowers.
- The chair said the Fed discussed yield curve control as an open question, reviewing historical and foreign experience, but made no decision on it.
- The chair said the June SEP shows a general expectation of recovery beginning in the second half of this year, but many participants noted multiple reasonably likely paths for the economy.
Summary generated automatically from the transcript and the statement.