The Federal Reserve Open Market Committee followed up three consecutive rate cuts at their July, September, and October meetings with a pause in December.
- The Federal Reserve held steady its target for overnight rates to a range of 0 – 0.25%, unchanged now three meetings and more to come
- There were no material policy changes, and we continue to anticipate zero interest rates through 2022, possibly longer
- Use of new tools in the FOMC kit will probably have to wait until the repeatedly delayed policy framework review, now set for 4Q
- Language in the FOMC statement once again expressed a high degree of uncertainty about the economic outlook
There was little scope for surprise in July’s FOMC meeting, as Fed policy continues to track down the middle of a narrow canyon. For the second consecutive meeting, policymakers both held overnight interest rates unchanged at the lower bound of 0 – 0.25% and elected not to announce any new or (economically material) changes to any previously-announced policy tools. The walls of our metaphorical canyon are, for the moment, comprised of noisy economic data, the long-delayed policy framework review, and the falling US dollar doing some heavy lifting of late—none of which will not likely clear up until 4Q.