FOMC Statement and Powell’s Press Conference

July 29, 2020

The Federal Open Market Committee ended its two-day policy review and released a statement that’s almost identical to the previous announcement on June 10. Just two sentences were added as indicated below, and none were deleted:

  1. Economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.
  2. The path of the economy will depend significantly on the course of the virus.

A decision to leave the federal funds target range at 0 to 1/4 percent, as at the committee’s prior meeting, was a unanimous 10-0 vote.

At the press conference afterward, Chairman Powell dropped no market-moving bombshells, and vital financial market indicators such as U.S. stock market indices, key dollar exchange rates, the 10-year Treasury yield, or commodity price levels at the end of the one-hour conference were comparatively near 14:00 GMT levels when the FOMC statement had been released.

Having said that, Powell seemed more cautious than at the prior meeting. He noted the obvious fact that the most important continuing driver of the U.S. economic performance going forward will be the pandemic, and he conceded several times that recent high-frequency data suggest that the rate of economic recovery appears to have slowed. He reassured the public that Fed officials haven’t even begun thinking about when to begin preparing for a less expansive stance. They prepared for the worst scenario, have plenty of tools to use if needed in the future, and expect to stay very stimulative while the pandemic remains a major factor and probably well beyond that point because aspects of the economy will require a lot of subsequent reconstruction. That said, he stressed the need for complementary fiscal support. Fiscal policy can do many things that monetary policy cannot. He applauded the speed and scope of the earlier large fiscal package and endorsed current efforts by Congress do fashion supplementary packages.

Copyright 2020, Larry Greenberg. All rights reserved.. No secondary distribution without express permission.



Comments are closed.