Steady as We Go: Fed Keeps Rates Unchanged

Key Points

  • The FOMC kept rates and its securities buying program unchanged, in a unanimous decision.

  • For the first time, the FOMC statement, referenced the vaccines and subtly suggested the Fed believes they are key to getting the economy back on track.

  • During the press conference, Powell deflected directly answering questions regarding this week’s frenzied and speculative trading in heavily-shorted stocks; but did address perceived connections between monetary policy and asset price surges.

In a unanimous decision, the Federal Open Market Committee (FOMC) of the Federal Reserve surprised no one and kept the fed funds rate unchanged and pinned near the zero bound. The FOMC also announced the maintenance of its securities buying—at $120 billion per month, and with no changes to the composition of its purchases—until “substantial further progress” toward its inflation and employment goals has been met. Key language in the FOMC statement included that the “pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.” It was a slight downgrade from the prior meeting’s statement, which noted that the economy “continued to recover.”

The statement did, for the first time, include a reference to vaccines, saying that the “path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment and inflation, and poses considerable risks to the economic outlook.”


Receiving attention on the Bloomberg live feed was that the FOMC maintained its language about helping market functioning: “These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.” Observers are noting that there haven’t really been any market “functioning” issues (under the Fed’s purview) since last spring.

Also highlighted on the Bloomberg live feed was the streamlining in the sentence about the virus and its impact on the economy. The removal of “medium term” (from the prior statement), with regard to risks to the economic outlook, could mean the Fed is a bit more optimistic that vaccinations will get the economy back on track.