Rates
- In its last scheduled meeting before the US presidential election, the FOMC voted to keep the Fed Funds target rate unchanged within the 0.00% to 0.25% range. This outcome was widely expected.
- Two members of the committee voted against the decision on the basis of differences with longer-term policy plans.
- The forward guidance on monetary policy indicated strong support within the committee for maintaining the current target range through 2023.
Inflation
- The statement added language reflecting Chairman Powell’s announcement in late August that the Fed would transition to an average inflation targeting methodology with respect to its 2% inflation target.
- The statement explicitly calls for the committee to target inflation in excess of 2% for a period of time, noting “…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.”
Asset Purchases
- In a change from recent statements, the Fed statement did not include commercial mortgage-backed securities in its pledge to increase asset holdings over the coming months.
- The monetary policy Implementation Note directs Federal Reserve staff to increase Treasury and agency mortgage-backed securities holdings at the “current pace” but now directs the purchase of commercial mortgage-backed securities only “as needed.”
Economic Projections
- The Fed’s median economic projections for 2020 anticipate improved outcomes versus what the Fed was predicting in June.
- The 2020 real GDP estimate moved up to -3.7% versus the -6.5% estimate from June. Likewise, the unemployment rate estimate dropped from 9.3% to 7.6%. The Fed’s PCE inflation expectation rose to 1.2% from 0.8%.
- The FOMC is next scheduled to meet November 4-5, immediately following the US presidential election.
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.
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