After the two-day monetary policy meeting, the Federal Reserve issued a statement saying that in order to achieve the two major goals of full employment and price stability, the Federal Open Market Committee of the Federal Reserve decided to keep interest rates unchanged. Since the current inflation rate is much higher than 2% and the job market is strong, the Federal Open Market Committee predicts that it is appropriate to raise the target range of the federal funds rate soon.
At the same time, the Fed decided to continue to reduce the monthly net asset purchase rate. Starting from February this year, the Fed will increase its holdings of at least $20 billion in US Treasury bonds and at least $654.38 billion in institutional mortgage-backed securities every month, and will end its asset purchase plan in March this year.
The statement said that the economic activity and employment indicators in the United States continued to strengthen, employment growth was strong, and the unemployment rate dropped sharply. The imbalance between supply and demand related to the COVID-19 epidemic and the re-opening of the economy continues to lead to an increase in the inflation rate. Economic development will still depend on the development of the epidemic. It is expected that the progress of vaccination and the relaxation of supply restrictions will support the sustained growth of economic activities and employment and low inflation, but there are still risks in the economic outlook, including those from COVID-19.
On the same day, the Federal Reserve also issued the principle of reducing its balance sheet. Members of the Federal Open Market Committee unanimously agreed that adjusting the target range of the federal funds interest rate is the main means to adjust its monetary policy, and the time and speed of shrinking the table will be decided according to the two major goals of promoting full employment and price stability. The Committee expects that the Fed will start the table shrinking process after it starts to raise interest rates.
At the press conference after the meeting, Federal Reserve Chairman Powell said that in view of the remarkable growth of the job market and the inflation rate far higher than the long-term inflation target of 2% set by the Federal Reserve, the US economy no longer needs "sustained high-level monetary policy support". However, the economic prospects of the United States are still very uncertain, and we should flexibly formulate appropriate monetary policies to cope with various possible economic outcomes.