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FOMC Statement, 6/10/20

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200610a.htm

June 10, 2020

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 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. Financial conditions have 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 increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to 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 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 June 10, 2020

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Re: FOMC Statement, 6/10/20

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200610a1.htm

June 10, 2020

Implementation Note issued June 10, 2020

Decisions Regarding Monetary Policy Implementation

The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on June 10, 2020:

  • 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 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 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) at least at the current pace to sustain smooth functioning of markets for these 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.

This information will be updated as appropriate to reflect decisions of the Federal Open Market Committee or the Board of Governors regarding details of the Federal Reserve's operational tools and approach used to implement monetary policy.

More information regarding open market operations and reinvestments may be found on the Federal Reserve Bank of New York's website.

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Frequent Contributor

Re: FOMC Statement, 6/10/20

Powell's press conference in 20 min.   https://www.federalreserve.gov/newsevents.htm

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Re: FOMC Statement, 6/10/20

FYI, here is a quick overview and interpretation of the Fed's talking points as reported in today's NYT:

"The Federal Reserve left interest rates unchanged and near zero on Wednesday as the central bank projected a slow economic recovery from the pandemic-induced recession.

In their first economic projections this year, Fed officials indicated that they expected the unemployment rate to end 2020 at 9.3 percent and remain elevated for years, coming in at 5.5 percent in 2022. Output is expected to be 6.5 percent lower at the end of this year than it was in the final quarter of 2019.

The new forecasts predict a much slower path back to economic strength than the Trump administration — and perhaps the stock market — seems to expect as the economy climbs out of a virus-spurred downturn. The Fed skipped its quarterly economic summary in March as the pandemic gripped the United States, sowing uncertainty as business activity came to a near standstill.

“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,” the Fed said in the post-meeting statement that accompanied the data outlook."

The Fed said that it would continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate."

 

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Re: FOMC Statement, 6/10/20

The words give me pause to say the least.  I am wondering what I should do to my asset allocation.  I hate to trim stocks since bonds and cash are ballast that return little.  I am even for the year and maybe have a few % over allocated to stock.

I will probably do what I usually do: nothing, nichts, nada.

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