This is not the first FOMC note in which we have emphasized the unexciting nature of Fed policy in a post-pandemic economic recovery.

  • The Federal Reserve held steady its target for overnight rates to a range of 0 – 0.25%, unchanged now five meetings, with more to come
  • There were no material policy changes, and we continue to anticipate rates set at zero through 2022, possibly longer
  • Language in the FOMC statement was almost entirely unchanged, but retains the very cautious tone set during July’s FOMC meeting
  • While the primary debate was (likely) about the volume and nature of QE, the Fed took the path of least resistance in making no changes

In many ways, that is a good thing; ultimately the private sector of the economy needs to take on more importance than monetary or fiscal policy to ensure a sustainable rebound. But, the clockwork nature of Federal Reserve meetings offers a structured decision point in a way that many other private sector or public sector actions do not, so alas, here we are once again. Once again, the Fed elected to hold policy essentially unchanged, with rates remaining at the zero lower bound (where they will in all likelihood stay for the next two years), and QE bond-buying holding at the $80-billion-per-month pace it has run since the Fed stabilized its emergency response over the summer. There had been some market expectation that the Fed would extend the average duration of new bond purchases, but even that remained unchanged.

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Guy LeBas

Director, Custom Fixed Income Solutions

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