November 03, 2021 ~~September 22, 2021~~

November 3, 2021 FOMC Statement

Target range 0.00–0.25% unchanged Vote 11–0 Tone: Balanced -0.24

At a glance·Statement·Our summary·Implementation Note·Press conference

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.

With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The 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. Inflation is elevated, largely reflecting ~~transitory factors.~~ factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors. 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 continues to depend on the course of the virus. Progress on vaccinations ~~will likely continue to reduce the effects~~ and an easing of ~~the public health crisis on the economy, but risks~~ supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. Risks to the economic outlook remain.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run 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. ~~Last~~ In light of the substantial further progress the economy has made toward the Committee's goals since last December, the Committee ~~indicated that it would continue~~ decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. Beginning later this month, the Committee will increase its holdings of Treasury securities by at least ~~$80~~ $70 billion per month and of agency mortgage‑backed securities by at least ~~$40~~ $35 billion per ~~month until substantial further progress has been made toward~~ month. Beginning in December, the Committee will increase its ~~maximum employment~~ holdings of Treasury securities by at least $60 billion per month and ~~price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the~~ of agency mortgage-backed securities by at least $30 billion per month. The Committee judges that ~~a moderation~~ similar reductions in the pace of net asset purchases ~~may soon~~ will likely be ~~warranted. These asset~~ appropriate each month, but it is prepared to adjust the pace of purchases ~~help~~ if warranted by changes in the economic outlook. The Federal Reserve's ongoing purchases and holdings of securities will continue to foster smooth market functioning and 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; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

Implementation Note issued ~~September 22,~~ November 3, 2021

Source

Our summary

What changed

The FOMC announced it will begin reducing the monthly pace of net asset purchases, by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities, starting later this month.
The statement specifies new monthly purchase caps: at least $70 billion in Treasuries and $35 billion in agency MBS beginning later this month, then $60 billion and $30 billion in December.
The FOMC now judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, while remaining prepared to adjust if the economic outlook changes.
The economic outlook language was updated: the summer's rise in COVID-19 cases is cited as slowing recovery, and progress on vaccinations and easing supply constraints are expected to support gains and reduce inflation.
The statement removed the prior language that the economy had made progress toward goals, replacing it with a decision to taper based on substantial further progress.

Implications

The shift from 'may soon be warranted' to an actual decision to taper signals the FOMC is moving toward normalizing policy, with a predictable monthly reduction path that could continue if the economy evolves as expected.

The updated inflation language, noting supply-demand imbalances and expected easing of supply constraints, suggests the FOMC sees price pressures as temporary but acknowledges their persistence, which may influence the pace of future tapering or rate decisions.

Markets may interpret the explicit monthly purchase schedule as a clear forward guide, reducing uncertainty about the near-term balance sheet path while leaving flexibility for adjustments if the outlook deteriorates.

Summary generated automatically from the statements. Not investment advice.

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 reserve balances at 0.15 percent, effective ~~September 23,~~ November 4, 2021.
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 ~~September 23,~~ November 4, 2021, 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~~ Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by $80 billion ~~per month~~ and of agency mortgage-backed securities (MBS) by $40 ~~billion per month.~~ billion, as indicated in the monthly purchase plans released in mid-October.
Increase the SOMA holdings of Treasury securities by $70 billion and of agency MBS by $35 billion, during the monthly purchase period beginning in mid-November.
Increase the SOMA holdings of Treasury securities by $60 billion and of agency MBS by $30 billion, during the monthly purchase period beginning in mid-December.
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.
Conduct overnight repurchase agreement operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.
Conduct overnight reverse repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $160 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.

Source

Press conference

November 3, 2021, 2:30 p.m. ET · Read the transcript

What Powell said that the statement didn't

The chair said the economy expanded at a 6.5 percent pace in the first half of the year, with third-quarter growth slowing notably due to the Delta variant and supply constraints.
The chair said job gains averaged 280,000 per month in August and September, down from about 1 million per month in June and July, with the slowdown concentrated in pandemic-sensitive sectors.
The chair said the unemployment rate of 4.8 percent in September understates the employment shortfall, partly because labor force participation for prime-aged individuals remains well below pre-pandemic levels.
The chair said the decision to taper asset purchases does not imply any direct signal regarding interest rate policy, and the test for raising rates is more stringent than for tapering.
The chair said inflation should decline from elevated levels by the second or third quarter of next year, as supply bottlenecks abate, but the timing is highly uncertain.

Summary generated automatically from the transcript and the statement.