It is unclear whether Federal Reserve officials are meeting in person or via Zoom. After all, it seems likely that most if not all FOMC members are fully vaccinated, but perhaps they’re trying to set a conservative example.

  • The Federal Reserve held steady its target for overnight rates to a range of 0 – 0.25%, as they have for more than a year
  • There were no material policy changes, and we continue to anticipate zero interest rates through 2022, possibly longer
  • Bond buying to continue at the current $120 billion/month pace ($80 billion USTs/$40 billion MBS) with no sign of taper on the horizon
  • Financial markets were nonplussed by the non-statement, and traded sideways ahead of Powell’s 2:30 p.m. ET press conference

Given, however, the lack of need to make any sort of meaningful decision at the April FOMC meeting, it probably matters not at all whether Neel Kashkari (and his regional colleagues) was in person, or pretending to pay attention to a video call while secretly web shopping for spring attire for his triplet Newfoundland pups. Sorry, Neel. As our readers can probably intuit from this sarcastic intro, the Fed made no large-scale changes on policy at today’s meeting.

In the last six weeks since the Fed’s March FOMC meeting, domestic economic conditions have trended quite well, though they were generally in line with optimistic expectations. March’s job gains measured more than 900K, and early estimates for April’s are in the 700K area, which would represent the best two months for a labor market rebound since late summer, and make a big dent in extended joblessness in particular. Other measures of economic growth have also been on a tear—again, largely in line with expectations. Headline retail sales, aided by federal transfer payments and tax refunds, posted the second-largest monthly increase in history, manufacturing sector growth continues to trend strong with the ISM holding above 60 for a third month, and the housing markets are roaring ahead so fast that demand is outstripping supply by a wide margin. Contemporaneous inflation numbers have been (again, expectedly) elevated, with the core CPI rising +0.3% MoM in March, but Fed officials have committed to looking through this short-term price spike to longer-term inflation risks, which remain only moderate at this point. That right there is the Fed’s message in a nutshell: policy is going to look through this period of high growth and short-term price pressures to see what comes next.

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About the author

Guy LeBas

Director, Custom Fixed Income Solutions

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