From being “prepared to use it full range of tools, the FOMC statement of April 29 said it is “committed” to their use. There was no change in the fed funds target rate or the wording for forward guidance which said, “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The FOMC will buy Treasury securities and Agency MBS. No upper limit to purchases was mentioned consistent with a previous statement. “In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations,” and will adjust “as appropriate”.
What seemed significant to me was that the emphasis on the provision of credit and repairing financial conditions to address “ongoing public health crisis” that is weighing “heavily” on economic activity. The full range of tools includes the liquidity facilities, not just interest rates, forward guidance, and asset purchases. Indeed, asset purchases were framed as “To support the flow of credit to households and businesses,” not as a stimulus measure. This is monetary policy, but still in crisis mode.
There was no dissent in the Committee vote.
In the implementation note, IOER was maintained at 0.10%, the ON RRP offer rate at 0.00%, and the discount rate at 0.25%.
Chair Powell’s post-meeting press briefing didn’t add much to the FOMC statement, but that was already a strongly worded commitment to keep the economy and financial system afloat until the wreckage brought by COVID-19 can be properly assessed. Powell was explicit in avoiding any forecasting of the outlook until the public health situation was under control. He seemed satisfied that efforts so far have helped and that the stance of monetary policy is “right where it should be for now”. However, he added the situation is “a new kind of uncertainty on top of regular uncertainty”. Big unknowns remain and the FOMC is “waiting to see the path of the economy” before it starts to take steps to assist its recovery.
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