An Essentially Unchanged FOMC Statement and No Great Illuminations from Powell’s Press Conference

November 5, 2020

Today’s monetary policy from the FOMC contains no meaningful modifications from the prior one on September 16th. The two insignificant changes occur in the second paragraph, which describes economic conditions. Number one, a factor that will be keeping inflation down was described in September a “significantly lower oil prices” and now as “earlier declines in oil prices.” Number two, the sentence in the September 16th statement with a clause that reads “Overall financial conditions have improved in recent months” now states simply “Overall financial conditions remain accommodative….” The statement says nothing about this week’s elections or the considerable intensification of U.S. Covid cases and hospitalizations since the September meeting, but Chairman Powell’s press conference at 19:30 GMT may allude to those developments.


With the election outcome still in doubt, it’s not surprising the Powell had to be circumspect on a number of topics even by the usual standards for such events. He declined to comment in any way on this week’s election or to criticize the fiscal haggling since the summer. He did assign a great deal of credit to the CARES Act for the economy bouncing back in May and June, saying that lawmakers struck the right not in the quickness and thrust of that response, and he asserted that more fiscal support would be constructive. But going beyond that to suggesting the composition, size and support of such help is not the central bank’s responsibility, he maintained. He feels the current monetary policy stance is appropriate. The use of its tools is still proving constructive to insure that financial market functionality as an intermediary continues and for supporting demand. He flatly ruled out money-financed fiscal policy as a future possibility. In one non-policy remark — Covid isn’t going away yet — he did depart from what some other parts of the Federal government have been saying, and Fed officials are monitoring how European economies respond to the second wave they are now experiencing.

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



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