FOMC Statement and Press Conference

January 27, 2021

Today’s FOMC statement makes some modifications in the second and third paragraphs that deal with current U.S. economic conditions and their outlook.  December’s press release had talked about a continuing recovery of activity and employment, while today’s assessment speaks of a “moderating” recovery recently concentrated in sectors affected by Covid. A phrase “progress on vaccinations” is included for the first time in the text. While there is no mention that progress has underperformed expectations, there would have been no mention of that matter if vaccinations were living up to earlier promises.

Regarding monetary policy settings, which were not changed at this first FOMC meeting of 2020, the framework within which those settings operate, and forward guidance of likely future policy decisions, no changes were made to the statement’s text.

There was a unanimous 11-0 vote for today’s monetary policy actions compared to the 10-0 vote at December’s meeting. Aside from the four-person rotation of federal reserve district presidents into the group that votes during 2021, which is discussed in the FOMC Preview posted earlier to this site, today’s meeting was attended by Christopher Waller. He is the most recent and final Trump appointee to the Board of Governors and was confirmed last month by the lame-duck senate along partisan lines.

During Chairman Powell’s press conference, a daily stock market sell-off that was already underway gathered additional momentum. However, nothing that transpired in the the press conference was either very unexpected or newsworthy. For me, the most surreal aspect of the presentation came not from Powell but a sequence of questions, often one after another, probing for details about timing and composition of an eventual exit from the appropriate very accommodative stance now in place. Insofar as a net of 9.8 million U.S. jobs were lost between February and December given a slew of major economies that for years have experienced unhealthily deficient inflation, now is hardly a sensible time to start clarifying details of the next monetary tightening.

Three other takeaways from the press conference stood out for me. Number one, the most influential key to cementing a return to decent economic growth is taming the pandemic. People not wearing a mask in public or getting a vaccine because they distrust public health are impeding a return to normal. Moreover, the lack of public cooperation with what health professionals are asking perpetuates the huge cloud of pandemic-related uncertainty facing the economy. Number two, the U.S. economy has shown considerable adaptability in the face of the year-long pandemic as attested by the diminishing economic hits taken by successive waves of the contagion that have actually increased in intensity. And Number three, Powell agrees that all sorts of social inequities in society impede the productive capacity of the whole economy.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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