The Federal Open Market Committee (FOMC) concluded its meeting November 5th. Given that the United States election has yet to be fully tallied as we went to press, interest in the Fed announcement was a bit muted compared to usual. In an address to the media, Chairman Jay Powell acknowledged some impressive strength in recent economic numbers, notably in housing, but he mostly stressed the severe threat that the virus poses to the continued economic recovery.

He said that the pace of economic recovery had moderated and urged Americans to take steps to protect themselves from COVID. At the FOMC meeting in September, the governors laid out a plan to give unprecedented monetary support to the economy by creating stringent criteria for raising rates.

The criteria are a healthy labor market moving toward maximum employment, an annual inflation rate of at least 2%, and forecasts that inflation will (in the future) moderately run above 2%, in line with the new AIT framework. The Fed's new statement remained steadfast in its commitment to these criteria, which many believe effectively amounts to guaranteeing low-bound rates for the next three to four years, maybe even longer. The Fed noted in their statement that inflation is abnormally subdued partially due to energy prices.


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