Fed Signals Liftoff 'Soon' and Sees Asset-Reduction Start Afterward

The Fed expressed that the economy's path continues to depend on the course of the coronavirus. 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, including from new virus variants.


The Committee seeks to achieve maximum employment and inflation at 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0.00% - 0.25%. With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the Fed Funds rate.


The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and agency mortgage-backed securities by at least $10 billion per month. The Federal Reserve's ongoing purchases and securities holdings will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.


Indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months but are affected by the recent sharp rise in COVID-19 cases. Job gains have been solid in recent months, and the unemployment rate has declined. Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated inflation levels. 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 vote was unanimous at this meeting.


Stocks climb to a session high on FOMC Statement. The yield on a 10-year Treasury note edged higher while the curve steepened.


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. Goldman predicts the Fed will hike rates four times this year, more than previously expected.


The next FOMC meeting is on March 16, 2022.






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