Unsurprisingly, the FOMC held rates constant at the zero lower bound at their March meeting, and left other aspects of monetary policy largely unchanged despite rising long-term interest rates.

  • The Federal Reserve held steady its target for overnight rates to a range of 0 – 0.25%, unchanged now seven meetings and more to come
  • Fed officials announced no material policy changes, and we continue to anticipate zero interest rates through 2022, possibly longer
  • Policymakers, heartened by the progress on vaccination, upgraded language in the FOMC statement ever so slightly
  • There was no concern evident in the statement that higher long-term interest rates might reduce the support the Fed provides the economy

A few years back, there was a popular child-raising book entitled Bringing up Bebe. The author posited that a key aspect of French child rearing was French parents typically hold their ground—even during the rare tantrum. While Jay Powell’s children were too old for that sort of advice by the time Bringing up Bebe hit the shelves, it seems Powell has nonetheless read the work. Or, at least it seems he has based on how he seems to be treating the bond markets this month. On this point, the FOMC statement underscored that policymakers worry little about higher interest rates impairing the economic recovery and are not giving into the rate tantrum.

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About the author

Guy LeBas

Director, Custom Fixed Income Solutions

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