What to Expect from the Upcoming Fed Meeting?

The upcoming Federal Reserve meeting is expected to link the future of the bond-buying program to the measures of employment and inflation, but without any immediate action, a recent survey by Bloomberg showed.

The majority of the surveyed analysts expect the new guidance to be approved next Wednesday, while most of the remaining analysts expect it in January or March of next year.

It is worth noting that this will be the last meeting for the Federal Open Market Committee (FOMC) in 2020.

Two-thirds of participating economists expect the FOMC will extend the average maturity of bond purchases before the end of 2021, while about 23% of expect it in the December meeting.

According to Bloomberg News, only 19% expect the Fed to increase the total size of monthly buying in the next year, while nearly 50% expect no changed until the end of next year.

The minutes of the committee meeting held on November 4-5 showed that policymakers have discussed potential adjustments to the asset purchase program.

The Federal Reserve reiterated its commitment 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.

“Participants noted that the Committee could provide more accommodation, if appropriate, by increasing the pace of purchases or by shifting its Treasury purchases to those with a longer maturity without increasing the size of its purchases.”

“Alternatively, the Committee could provide more accommodation, if appropriate, by conducting purchases of the same pace and composition over a longer horizon.”

“Over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”

The Fed Chair, Jerome Powell, recently warned that the negative impacts from the Coronavirus pandemic could lead to greater inequality.

Powell also called for greater government support, the New York Times reported.

“There is a great risk of the pandemic making them worse,” Powell said on Tuesday, speaking before the Senate Banking Committee.

“There’s a real concern that if we don’t act as quickly as possible to support those people, get them back to work, get the economy up and running as much as possible, that we’ll leave behind a more unequal situation.”

Powell also suggested that additional support is needed from both the Federal Reserve and Congress to bridge the gap and stimulate economic recovery.

The Fed Chair further noted that American monetary policymakers intend to maintain the record low interest rates until the economic recovery goals are achieved.

“We can see the end. We just need to get there.”

“People that are in public-facing jobs, in public-facing industries – they may see the light at the end of the tunnel the middle of next year … They may need more help to get there,” Powell was quoted by Reuters as saying.