December 16, 2020
November 05, 2020
Jerome H. Powell
December 16, 2020 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EST
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 continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, 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 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 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 continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least at $40 billion per month until substantial further progress has been made toward the current pace to sustain Committee's maximum employment and price stability goals. These asset purchases help foster 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; Mary C. Daly; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles. Ms. Daly voted as an alternate member at this meeting.
Implementation Note issued November 5, December 16, 2020
Our summary
What changed
- The FOMC kept the federal funds rate target range at 0 to 1/4 percent, unchanged from the previous statement.
- The asset purchase guidance was made more specific: the Fed will increase Treasury holdings by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month, continuing until substantial further progress toward goals.
- The previous statement's language about increasing holdings 'at least at the current pace' was replaced with explicit monthly purchase amounts and a condition tied to progress on employment and inflation goals.
- The voting roster changed: Neel Kashkari replaced Mary Daly, who had voted as an alternate in November; the current statement lists no alternate member.
Implications
The explicit purchase pace and progress condition signal a firmer commitment to sustained accommodation, suggesting the Fed will maintain large-scale asset purchases until the economy shows clear improvement.
Markets may interpret the removal of the 'at least at the current pace' phrasing as a shift toward more predictable, outcome-based guidance, potentially reducing uncertainty about the timing of tapering.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2020 | 2021 | 2022 | 2023 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | -2.4 was -3.7 | 4.2 was 4.0 | 3.2 was 3.0 | 2.4 was 2.5 | 1.8 was 1.9 |
| Unemployment rate | 6.7 was 7.6 | 5.0 was 5.5 | 4.2 was 4.6 | 3.7 was 4.0 | 4.1 |
| PCE inflation | 1.2 | 1.8 was 1.7 | 1.9 was 1.8 | 2.0 | 2.0 |
| Core PCE inflation | 1.4 was 1.5 | 1.8 was 1.7 | 1.9 was 1.8 | 2.0 | |
| Federal funds rate | 0.1 | 0.1 | 0.1 | 0.1 | 2.5 |
Median projections of FOMC participants; previous: September.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
December September median September 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
November 6,December 17, 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
November 6,December 17, 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 by $80 billion per month and of agency mortgage-backed securities (MBS) by $40 billion per month.
- Increase
the System Open Market Accountholdings of Treasury securities and agencymortgage-backed securities (MBS) at the current pace. Increase holdings of Treasury securities and agencyMBS by additional amounts and purchase agency commercial mortgage-backed securities (CMBS) as needed to sustain smooth functioning of markets for these securities. - 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.
- 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
December 16, 2020, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said real GDP rose at an annual rate of 33 percent in the third quarter, a figure not in the statement.
- The chair said more than half of the 22 million jobs lost in March and April have been regained, with November job growth at 245,000 and unemployment at 6.7 percent.
- The chair said FOMC participants' median projections show unemployment at 5 percent by end of next year and below 4 percent by 2023, and inflation rising from 1.2 percent this year to 1.8 percent next year and 2 percent in 2023.
- The chair said funds from the CARES Act will not support new loans or asset purchases after December 31, but the Treasury could authorize support through the Exchange Stabilization Fund if needed.
- The chair said the Fed has the flexibility to adjust asset purchases, including lengthening maturities, but views on such a shift were mixed and it is not high on the list of possibilities.
Summary generated automatically from the transcript and the statement.