FX.co ★ US stock market on December 15. Fed to accelerate support program cut

S&P500

What information did the Fed provide on December 15?

The Federal Reserve is seeking to use its full range of tools to support the US economy in these challenging times, thereby promoting its goals of maximum employment and price stability.

With progress on vaccinations and strong political support, economic activity and employment have continued to improve. The sectors most affected by the pandemic have improved in recent months, but COVID-19 continues to hit them. Job gains in recent months have been significant and unemployment rates have declined substantially. Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. Overall financial conditions remain favourable, partly reflecting policy measures to support the economy and the flow of credit to US households and businesses.

The economic path continues to depend on the spread of the virus. Progress on vaccinations and an easing of supply constraints are expected to support further gains in economic activity and employment, as well as a reduction in inflation. Risks to the economic outlook remain, including from new variants of the virus.

The Committee aims to achieve maximum employment and inflation at the rate of 2% in the long term. In support of these goals, the Committee decided to keep the target range for the federal funds rate at between 0 and 1/4%. With inflation having exceeded 2% for some time, the Committee expects that it will be appropriate to maintain this target range until labour market conditions reach levels consistent with the Committee's maximum employment assessments. In light of inflation developments and the further improvement in the labor market, the Committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. Beginning in January, the Committee will increase its holdings of Treasury securities by at least $40 billion a month and mortgage-backed securities by at least $20 billion a month. The Committee believes that a similar reduction in the pace of net asset purchases is likely to be appropriate each month, but it is willing to adjust the pace of purchases if warranted by changes in the economic outlook. The Federal Reserve's ongoing purchases and holdings of securities will continue to contribute to a smoothly functioning market and favourable financial conditions, thereby maintaining the flow of credit to households and businesses.

In assessing the appropriate monetary policy stance, the Committee will continue to monitor the impact of incoming information on the economic outlook. The Committee will be prepared to adjust the course of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including data on public health, labour market conditions, inflationary pressures and expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.