January 26th FOMC Follow-Up

Share this Post:

Share on facebook
Share on twitter
Share on linkedin
Share on email

Rates

  • The FOMC unanimously voted to keep the federal funds target rate unchanged within the 0.00% to 0.25% range. This outcome was widely expected by market observers.
  • The Committee gave support to investors expecting a March liftoff in rates, noting that “it will soon be appropriate to raise the target range for the federal funds rate.”
  • In trading after the announcement, markets were pricing in a greater than 50% chance of four or more 25 bp rate hikes by the end of the year.

Fed Balance Sheet

  • Asset purchases will continue to be reduced at the accelerated pace that was first announced in December. The Fed will purchase at least $20 billion in Treasury securities and $10 billion of agency mortgage-backed securities per month in February. This will bring Fed balance sheet expansion to a close in early March.
  • The FOMC additionally published a separate statement, “Principles for Reducing the Size of the Federal Reserve’s Balance Sheet”. This reiterated the view that the fed funds target rate is the “primary means of adjusting the stance of monetary policy.”
  • Reductions in the size of the Fed’s balance sheet “will commence after the process of increasing the target range for the federal funds rate has begun.”
  • The Committee noted a preference for holding primarily Treasury securities in the longer run, in order to minimize the impact of balance sheet holdings on credit markets.

Economic Conditions

  • The FOMC updated the language in its statement around inflation and the labor market. The new language described inflation as now “well above” the 2 percent target and noted the labor market is “strong”.
  • Chairman Powell indicated in the press conference that the rise in Covid cases caused by the Omicron variant will likely have a negative impact on economic growth in Q1.

The FOMC is next scheduled to meet March 15-16, 2022.

Disclosures

The views expressed herein are those of Asset Consulting Group (ACG). They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm.

This report was prepared by ACG for you at your request. Although the information presented herein has been obtained from and is based upon sources ACG believes to be reliable, no representation or warranty, express or implied, is made as to the accuracy or completeness of that information. Accordingly, ACG does not itself endorse or guarantee, and does not itself assume liability whatsoever for, the accuracy or reliability of any third party data or the financial information contained herein.

Certain information herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “expect”, “anticipate”, “project”, “estimate”, or any variations thereof. As a result of various uncertainties and actual events, including those discussed herein, actual results or performance of a particular investment strategy may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements in making investment decisions. ACG has no duty to update or amend such forward-looking statements.

The information presented herein is for informational purposes only and is not intended as an offer to sell or the solicitation of an offer to purchase a security.

Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions, (ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put.

The projections or other information generated by ACG regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Judgments and approximations are a necessary and integral part of constructing projected returns. Any estimate of what could have been an investment strategy’s performance is likely to differ from what the strategy would actually have yielded had it been in existence during the relevant period. The source and use of data and the arithmetic operations used for calculating projected returns may be incorrect, inappropriate, flawed or otherwise deficient.

Past performance is not indicative of future results. Given the inherent volatility of the securities markets, you should not assume that your investments will experience returns comparable to those shown in the analysis contained in this report. For example, market and economic conditions may change in the future producing materially different results than those shown included in the analysis contained in this report. Any comparison to an index is for comparative purposes only. An investment cannot be made directly into an index. Indices are unmanaged and do not reflect the deduction of advisory fees.

This report is distributed with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters. No assurance can be given that the investment objectives described herein will be achieved and investment results may vary substantially on a quarterly, annual or other periodic basis. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

Gryphon Financial Partners shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This was created for informational purposes only. Gryphon Financial Partners, LLC is an Investment Adviser.

Share this post:

Share on facebook
Share on twitter
Share on linkedin
Share on email

Leave a Reply

Your email address will not be published.

This website uses cookies to ensure you get the best experience.  Learn more

Skip to content