December 15, 2021
November 03, 2021
Jerome H. Powell
December 15, 2021 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT 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.
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, months but the summer's rise in COVID-19 cases has slowed their recovery. Inflation is elevated, largely reflecting factors that are expected continue to be transitory. affected by COVID-19. Job gains have been solid in recent months, and the unemployment rate has declined substantially. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed continued to sizable price increases in some sectors. contribute to elevated levels of 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 continues to depend on the course of the virus. Progress on vaccinations and an easing of 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. remain, including from new variants of the virus.
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 In support of monetary policy until these outcomes are achieved. The goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation having exceeded 2 percent and for some time, the Committee 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. employment. In light of inflation developments and the substantial further progress improvement in the economy has made toward labor market, the Committee's goals since last December, the Committee decided to begin reducing reduce the monthly pace of its net asset purchases by $10 $20 billion for Treasury securities and $5 $10 billion for agency mortgage-backed securities. 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, January, the Committee will increase its holdings of Treasury securities by at least $60 $40 billion per month and of agency mortgage-backed mortgage‑backed securities by at least $30 $20 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. 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 November 3, December 15, 2021
Our summary
What changed
- The FOMC doubled the pace of tapering, reducing net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities, with January purchases set at $40 billion and $20 billion respectively.
- The statement removed the forward guidance that inflation would need to be on track to moderately exceed 2 percent for some time, now only requiring labor market conditions consistent with maximum employment.
- The economic outlook language was updated: job gains are solid, unemployment has declined substantially, and inflation is described as elevated due to continued supply-demand imbalances.
- Risks to the outlook now explicitly include new variants of the virus.
- The statement no longer includes the aim to achieve inflation moderately above 2 percent for some time, reflecting that inflation has already exceeded 2 percent.
Implications
The faster taper suggests the FOMC is responding to higher inflation and a stronger labor market, potentially setting the stage for earlier rate liftoff.
Removing the inflation overshoot guidance and focusing solely on maximum employment indicates a shift in the FOMC's reaction function, with markets likely to interpret this as a more hawkish stance.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2021 | 2022 | 2023 | 2024 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 5.5 was 5.9 | 4.0 was 3.8 | 2.2 was 2.5 | 2.0 | 1.8 |
| Unemployment rate | 4.3 was 4.8 | 3.5 was 3.8 | 3.5 | 3.5 | 4.0 |
| PCE inflation | 5.3 was 4.2 | 2.6 was 2.2 | 2.3 was 2.2 | 2.1 | 2.0 |
| Core PCE inflation | 4.4 was 3.7 | 2.7 was 2.3 | 2.3 was 2.2 | 2.1 | |
| Federal funds rate | 0.1 | 0.9 was 0.3 | 1.6 was 1.0 | 2.1 was 1.8 | 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 reserve balances at 0.15 percent, effective
November 4,December 16, 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
November 4,December 16, 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.
- Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by
$80$60 billion and of agency mortgage-backed securities (MBS) by$40$30 billion, as indicated in the monthly purchase plans released inmid-October.mid- December. - Increase the SOMA holdings of Treasury securities by
$70$40 billion and of agency MBS by$35$20 billion, during the monthly purchase period beginning inmid-November.mid-January. - Increase holdings of Treasury securities and agency MBS by additional amounts 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.
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.
Press conference
December 15, 2021, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the median FOMC projection for real GDP growth is 5.5 percent this year and 4 percent next year.
- The chair said the median projection for the unemployment rate declines to 3.5 percent by the end of the year, revised noticeably lower from September.
- The chair said the median inflation projection falls from 5.3 percent this year to 2.6 percent next year, notably higher than projected in September.
- The chair said the median projection for the federal funds rate is 0.9 percent at the end of 2022, about half a percentage point higher than projected in September.
- The chair said the FOMC had its first discussion about the balance sheet, and he does not foresee an extended wait between the end of the taper and the first rate increase, given the stronger economy.
Summary generated automatically from the transcript and the statement.