December 16 FOMC Summary

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Below is a brief summary of yesterday’s FOMC statement.


  • In their final meeting of 2020, the FOMC voted to keep the Fed Funds target rate unchanged within the 0.00% to 0.25% range.
  • This outcome was widely expected, and all committee members voted in favor of the action.
  • The forward guidance on monetary policy indicated continued support for maintaining the current target range through 2023.


  • Today’s statement reiterated the Committee’s commitment to the average inflation-targeting approach that was announced in August and September.
  • The language remained unchanged, as the statement again noted the Fed will “aim to achieve inflation moderately above 2 percent for some time…”
  • The forward guidance for inflation showed a slight increase from September’s estimate, with a median estimate of 1.8% for PCE inflation and 1.8% for Core PCE inflation in 2021.

Asset Purchases

  • While there were no changes to the level of asset purchases, the forward guidance language removed the phrase “…in the coming months” and noted that asset purchases of $80 billion in Treasuries and $40 billion in agency MBS per month would continue “until substantial further progress has been made towards the Committee’s maximum employment and price stability goals.”
  • When asked about increasing the duration of asset purchases in the Q&A following the meeting, Chairman Powell noted that while that was considered, they did not feel that it was necessary at this time.

Economic Conditions

  • The Fed’s economic outlook has improved since September. Although in the press conference following the meeting, Powell noted that while longer run forecasts have improved, the coming months will be challenging and likely be reflected in 1Q21 results.
  • The median 2020 estimate of change in real GDP improved from September’s estimate of -3.7% to -2.4% in December, and the median 2020 estimated unemployment rate improved from September’s estimate of 7.6% to 6.7% in December.

The FOMC is next scheduled to meet January 26 – 27, 2021.


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