England go through to the round of 16 top of the group after beating the Czech Republic 1-0 at Wembley, while Scotland beaten 3-1.Tuesday 22 June 2021 22:49, UKScotland have been knocked out of Euro 2020 after losing 3-1 against Croatia and finishing bottom of Group D.The result in Glasgow means Scotland have still never managed to make it to the knockout stages of the competition.Meanwhile at Wembley, England secured top spot in the same group after beating the Czech Republic 1-0.At Hampden Park, Celtic's Callum McGregor gave his side hope after he cancelled out Nikola Vlasic's opener.But Scottish hearts were broken after Luka Modric's wonder-strike just after the hour mark left David Marshall clawing at thin air.And their fate was confirmed on 77 minutes when Ivan Perisic scored from a corner.England played out their last game of the group stages, having already joined Wales in progressing to the next round.Wembley saw a back-and-forth game between England and the Czech Republic, with both sides seeing a number of chances in the first half.But it was Raheem Sterling's first-half header that sealed it for England - his second goal of the tournament.The second half saw a number of changes as both teams had already qualified for the knock-outs and Jordan Henderson had a goal disallowed for offside.England supporters gathered in Trafalgar Square in central London to watch their team progress out of the group stages.Cheers rang around the fountains as Sterling nodded home after 12 minutes.Emma Birkett, a key worker, said before the final whistle that she was hoping the Three Lions would finish second in Group D - to try and avoid a potential clash with France, Portugal or Germany.She said: "There is something great about being an underdog because we are always almost there."It would almost be better not to win this one because we don't really want to go head to head with the 'group of death'."Speaking after their win, Sterling told ITV: "At some point you are going to have to face the best teams, that's the whole point of being in the tournament which is to challenge yourself."Our objective from the beginning was to win the group. It's tournament football and things are going to be difficult at times but we need to keep doing what we're doing as a team which is being solid and taking our chances when we can."He added: "If you don't concede goals you win football matches and we've been doing that really well."People are disappointed with the Scotland game a couple of days ago, we didn't score but we didn't concede and that's the most important thing."Job done! ✅The #ThreeLions finish top of Group D and go into the knockout stages of #EURO2020. pic.twitter.com/o1fDIlIYy3After their defeat, the Scottish team's Twitter account thanked the fans who had cheered on the players.They said: "Our UEFA EURO 2020 journey comes to an end."Your support throughout the tournament has been truly incredible. We cannot say it enough: thank you."And Scotland's first minister Nicola Sturgeon said she was "proud" of the team.Our UEFA EURO 2020 journey comes to an end.Your support throughout the tournament has been truly incredible. We cannot say it enough: thank you.#EURO2020 | #SCO pic.twitter.com/rp98z21tyyShe tweeted: "Not to be, but thank you @ScotlandNT for taking us to our first men's tournament in 23 years - you've played your hearts out and we've been proud to cheer you on."Speaking after the game, goalscorer McGregor said: "The lads are shattered, we put so much into it. Too much quality in the end - the second goal, that's what we're up against at this level."It was a proud moment to get my first goal but ultimately we're disappointed. It gives you the hunger to try and get back here."The fans were first-class, we just want to thank them."Fellow midfielder John McGinn told ITV: "We didn't get off to best of starts in the group and tonight we came up against an excellent team with tournament experience. They've got one of the best players in the world in Luka Modric."We've got to use this experience to get to more tournaments. The World Cup is our aim now. We want this to be the start."We're not used to this but we need to become a nation who are used to this." © 2021 Sky UK
drag me to text box!Euro 2020: Scotland crash out after defeat to Croatia - while England top Group DThey will be the largest crowds for more than 15 months, with the culture secretary promising an "unforgettable moment". Tuesday 22 June 2021 22:08, UKThe World Health Organisation is "concerned" about lockdown restrictions easing in countries hosting Euro 2020 games, with fears around the number of fans allowed into stadiums.The comments from an official came after it was announced that the number of fans permitted to attend the semi-finals and final of the competition at Wembley has been increased to 60,000.They will be the largest crowds at UK sporting events in more than 15 months.It is not clear exactly how many fans will be let through the turnstiles, but the culture department (DCMS) said attendance would be increased to "75% capacity", which is 67,500.WHO official Robb Butler told Sky News: "WHO is concerned about easing of restrictions in some of the host countries."He added: "A few of the stadiums hosting the tournament are now increasing the number of spectators allowed in the stadium to watch a game. In a few of the host cities, COVID-19 cases are already on the rise in the area where matches will be held."Learning from experience, we must act fast on signals showing increasing cases - expanding testing and sequencing; stepping up contact tracing; and building very high vaccine uptake fast among those vulnerable and most at risk."All ticket holders for the matches on 6, 7 and 11 July must be able to show a negative COVID-19 test or proof of full vaccination - 14 days before each fixture.Those registered with a GP in England will be able to display their proof of two jabs via the NHS App, or through a printout for people from Scotland or Wales.A negative lateral flow test can be shown via email, a text message or the NHS App. Further details - including on ticket sales - will be given by UEFA in due course, DCMS said.Professor Tim Spector, co-founder of the Zoe symptom-tracker app and an epidemiologist, told Sky News it "doesn't make a lot of sense" to allow 60,000 fans at Wembley - but ban travel to red list countries."We've got this strange travel policy where people can't go abroad, but we can have 60,000 people at Wembley," he said."It's okay if you're happy to have a few extra cases of COVID, but I think people need to be honest about the risk."Because the Delta (Indian) variant is more transmissible, it's really hard to avoid getting it in big crowds, even if you've been vaccinated."The DCMS said other events in the summer sporting calendar, including Wimbledon, the rugby league Challenge Cup Final and men's international cricket involving England, Pakistan and Sri Lanka will "also go ahead with greater capacities".It is part of the government's Events Research Programme (ERP) as the UK gradually emerges from the coronavirus pandemic. Up to 20 indoor and outdoor events are also being planned that will "allow audience numbers to return close to full capacity", DCMS said.It will "continue to trial the use of COVID status certification" and the pilots "will involve the ramping up of trialling the use of the NHS App and lateral flow testing, as proof of a person's COVID-status".Trials of the NHS App "will be run to assess whether it can also be used to display a user's natural immunity status".There have been reports suggesting the Euro 2020 final could be moved to Budapest, Hungary, following controversy over potentially allowing 2,500 international VIPs to attend without having to quarantine when arriving in the UK.Italian Prime Minister Mario Draghi has said Rome could be an alternative venue.But UEFA said there are "no plans to change the venue" for the semi-finals and final.Culture Secretary Oliver Dowden said "rigorous and tight public health measures remain in place" while allowing "more fans to see the action live".He added: "The finals promise to be an unforgettable moment in our national recovery from the pandemic."London Mayor Sadiq Khan said the matches will "show that when it comes to great sporting events, London simply cannot be beaten". © 2021 Sky UK
drag me to text box!Euro 2020: More than 60,000 fans allowed in Wembley for semi-finals and finalSky News has uncovered evidence showing the extent to which Uighur sites are being bulldozed and built over as part of China's efforts to change the autonomous region they come from.Among the monuments to the past which have been replaced are cemeteries, religious buildings and typical architecture. A Sky News team visited Hotan in China's western Xinjiang province and found cultural and historical landmarks flattened and replaced by concrete, and what could be a bone from a grave that had been paved over.This is what we found… By Tom Cheshire, Asia correspondentTarwizim Cemetery in Hotan, Xinjiang, was "not that big but many people – our relatives – had their loved ones buried there," Mergube said. She didn't want her surname to be used because she is afraid of the consequences of speaking publicly. "Some of the burial sites were flat, some had domes with ornaments, there were trees in it. In the summer they would bring flowers to the tombs. That is what I remember," she told us. Mergube grew up in Hotan and is Uighur.She and her family fled China in 2016, fearing for their safety as Uighurs started to be detained in greater numbers by the Chinese authorities. Her grandfather was buried in Tarwizim Cemetery. After they left China, her family heard the graveyard had been destroyed. "These cemeteries were reminding us of who we are," she said. "Our identity, how we were living. We could remember our memories. By erasing them they may want to erase our memories." Mergube says that by erasing the sites Uighurs regard as culturally important, their memories are being erased tooMergube says that by erasing the sites Uighurs regard as culturally important, their memories are being erased tooBefore Sky News visited, satellite images appeared to show a drastic change over the cemetery site. But the details on the ground were unknown. Mergube asked us to find out more. "Maybe the places you go will be limited, you may not be allowed everywhere", she said. "But I think you need to pay attention, to everyone you meet, every person, every location."Some of what China does in Xinjiang is obvious. From the aeroplane, it was possible to see the vast, recently expanded complex of Urumqi prison. Urumqi prison, visible from the air to those who fly over the Xinjiang city, has been recently expandedUrumqi prison, visible from the air to those who fly over the Xinjiang city, has been recently expandedOn the ground in Hotan, access is difficult. As soon as we landed, we were followed nonstop by different vehicles – as many as five at one time. And when we arrived at the GPS coordinates for Tarwizim cemetery, we were initially not sure we were in the right place. There was simply nothing there. Just a muddy expanse, with dirt paths across it. The access roads on the other side were blocked off and a man who refused to identify himself, or say what the location was, stopped us filming. There was almost no trace of a cemetery. Almost. We just had to follow Mergube's advice – and pay closer attention. As we tried to make our way across a field, another man came and blocked our way, and told us to leave. As we tried to speak to him, or wondered whether we should just wait it out, we spotted something in the earth. The wrecked, wooden structure of a Uighur grave marking, pummelled into the earth. And something else. A bone, bleached white, exposed to the elements.Six forensics experts have told Sky News they believe this bone is humanSix forensics experts have told Sky News they believe this bone is humanSix different forensics experts who have seen this image have told Sky News that this is probably a human bone – most likely, the thigh bone of a child. Complete certainty is impossible without further examination, the experts said. We left the old cemetery and shared our footage with Mergube."Yes… This is the place," she said. "They have taken the remains, either they moved them or disposed of them, and they destroyed the cemetery. But yes, that is it." "Every time news come from inside, one loses hope. You have no hope left for anything. Maybe that is what they wanted." Mergube has only one, bleak consolation. "We got so used to seeing living people disappear, losing our dead does not affect us as much."Sky News has obtained a series of pictures and visited the locations where they were taken, to show how Uighur sites in the Hotan area have been lost.One of the clearest losses to the city's skyline is the tower of the Grand Bazaar. It was not a particularly old building, only completed this century, but the shopping complex has been closed off and looks abandoned, apparently ready for redevelopment. It still stands but the high, Islamic-style tower – one of the tallest in Xinjiang before its removal - has been completely demolished.The Sultanim Cemetery was much bigger than Tarwizim and located close to the old town. People would gather there every Thursday to say prayers. When Sky News visited, the cemetery had been demolished and divided into two.One half is now a large car park for the hospital nearby.The other is a large construction site, with deep foundations already dug. A local told us it was a residential property development. Chinese state media has reported that the cemetery was moved wholesale to the outskirts of town.The old town of Hotan has been completely redeveloped over the last few years.The new buildings are neat and spacious, and decorated in traditional Islamic style for the region. The nearby mosque of Jiaman is still standing and appears to have been renovated. But others have been lost.Hotan's Id Kah mosque was described by one Uighur who fled China as the "Times Square" of Hotan – a busy place where people would always gather.It, too, is now a car park.Other sites are located much further outside the city centre.Every spring, thousands of people would trek out into the desert to the Imam Asim Shrine, supposedly the burial site of one of the earliest Muslims to arrive in the Hotan region – a symbolic ancestor of the Uighur people.Pic taken 2008: Thousands of people would trek out into the desert to the Imam Asim shrinePic taken 2008: Thousands of people would trek out into the desert to the Imam Asim shrineWhen Sky News tried to visit, we found numerous roads shut off. Some were obviously temporary roadblocks, manned by police. We kept driving along the edge of the desert and found a spot to pull over. The shrine was a 2.5km trek straight through the sand.As we got closer, we noticed figures on the top of the dunes, watching us. We pressed on and they drew closer, slowly encircling us. About 200 metres from the shrine, we were surrounded by eight men.The Sky News team was met by people who ordered them back to their carThe Sky News team was met by people who ordered them back to their carThey did not identify themselves when asked but blocked the way and ordered us to turn around. Outnumbered, we complied. They followed us through the desert all the way back to our car.China has said that journalists are welcome to go to Xinjiang. The reception on the ground is rather different. Part of Tarwizim Cemetery is now a landscaped park with a monument proclaiming ethnic unity. A road now runs through the middle and on the other side is wasteland.A former building that was once used to store bodies to be wrapped in white linen before burial is now shuttered and disused.None of the tombs, ornaments and decorations that used to fill the space are there any more.A monument to cultural unity now sits on the spot where Uighurs buried their deadA monument to cultural unity now sits on the spot where Uighurs buried their deadSky News contacted several forensic experts to identify the bone from Tarwizim Cemetery. They all cautioned that 100% certainty in identification was impossible due to the angle of the photo. An angle of the bone's reverse would likely have been enough for confirmation but our team left the bone undisturbed.All six experts thought it was most likely a human bone. Dr Nicholas Márquez-Grant, senior lecturer in forensic anthropology at Cranfield University, who has assisted in many crime scene investigations for police forces in England and Wales, told Sky News: "Based on the image alone, in my opinion, it appears that the bone is a thigh bone (left femur) of a child (as the ends are not fused yet).At least one expert has determined that the bone found at the site by Sky News is a thigh bone (left femur) of a childAt least one expert has determined that the bone found at the site by Sky News is a thigh bone (left femur) of a child"It is difficult to tell from the photographs but there are many features or characteristics that would be consistent with a human femur. Without further evidence it is hard to provide a definite evidence however this would be my working hypothesis.""I would say it appears to be human from the photographs. However, because we haven't got a different angle or a different photograph, it's difficult to say 100% that it is.""We know it's not an adult, it's a child. It could be between five to 15 years."Dr Nicholas Passalacqua, the director of forensic anthropology at Western Carolina University and the author of textbooks on the subject, told Sky News the bone "appears to be from a subadult human". The Chinese government's policies in Xinjiang are by now well known. Around a million people may have been detained in camps, according to a United Nations human rights panel, and the US government, along with several western parliaments, have described China's actions as genocide. Some of those in the Hotan area who fall foul of the Chinese authorities are held in prisons like this one in Karakax, outside the citySome of those in the Hotan area who fall foul of the Chinese authorities are held in prisons like this one in Karakax, outside the cityChina says the camps are vocational training centres, necessary to prevent the terrorism the region has suffered in the past. As part of the ongoing campaign, culturally important places have also been targeted. A report by Bahram Sintash for the Uighur Human Rights Project said: "The destruction of mosques is at the heart of the Chinese government's campaign of cultural genocide in the Uighur homeland. It appears their ultimate goal is to eliminate the Islamic faith from the region." There is a strong Islamic tradition in Xinjiang as illustrated by these men breaking the Ramadan fast in Hotan this yearThere is a strong Islamic tradition in Xinjiang as illustrated by these men breaking the Ramadan fast in Hotan this yearA 2020 report from the Australian Strategic Policy Institute estimated that more than 24,000 mosques in Xinjiang had been demolished, and 50% of protected cultural sites had been damaged or destroyed. Sky News contacted the Chinese Ministry of Foreign Affairs but did not receive a response to our questions ahead of publication. China has previously said that reports of the mass destruction of mosques are "ridiculous". At a news conference in March, a spokesperson for the Xinjiang government said: "The Constitution of the People's Republic of China stipulates that Chinese citizens enjoy the rights to have religious belief. No government organisations, social groups or individuals shall force them to have or not to have religious beliefs. Nor shall they discriminate against people having or not having religious beliefs. All legitimate religious activities are protected by the country." Hotan is testament to the rapid changes in cities in Xinjiang. The Chinese authorities have been accused of radically reshaping the urban landscape of Xinjiang's historic centres, including Hotan's old townThe Chinese authorities have been accused of radically reshaping the urban landscape of Xinjiang's historic centres, including Hotan's old town"In the city of Hotan, we're seeing a radical reshaping of the urban landscape and the rural landscape around it, which includes the destruction of the traditional city centre, closure or some mass destruction of other mosques, the building of new schools," Dr Rian Thum, a historian of Islam at the University of Nottingham, told Sky News. "And then around in the outskirts, we see the destruction of holy places, historical sites and cemeteries as well." According to Dr Thum, the official explanation for this destruction is that "they claim to be modernising, to be bringing civilisation to people who they view as backwards. Their attacks on religious sites are framed as a way to reduce extremism, despite the fact that these sites tend to be sort of very ordinary parts of the local community and local tradition". Tower blocks are now the backdrop to a patch of earth where a now demolished mosque used to stand in Karakax, outside HotanTower blocks are now the backdrop to a patch of earth where a now demolished mosque used to stand in Karakax, outside Hotan"But taken altogether, what it looks like is an attempt to completely re-engineer Uighur culture."Reporting: Tom Cheshire, Asia correspondentProduction: Leo Lord-Jones, Asia producer; Guldenay Sonumut, international producerPhotography: Marc Hofer; Google Earth; Rian Thum; Bahram Sintash; Reuters; Associated PressTechnical assistance: Bahram Sintash (Author of Demolishing Faith: The Destruction and Desecration of Uyghur Mosques and Shrines)Digital production: Philip WhitesideGraphics: Stacey Drake; Pippa Oakley © 2021 Sky UK
drag me to text box!Paving over the dead: How China is 'erasing' the Uighur people's pastBabis Anagnostopoulos arrived at court flanked by armed police on Tuesday morning to testify about what happened on 11 May. News reporter @luciabinding Tuesday 22 June 2021 21:19, UKPlease use Chrome browser for a more accessible video playerA Greek helicopter pilot who has admitted murdering his British wife after first claiming she was killed in a robbery has told a court in Athens: "I ruined my life, I ruined my family's life."Babis Anagnostopoulos arrived at court wearing a bullet-proof vest and flanked by armed police.In the courtroom he gave five hours of testimony, detailing his version of what happened on 11 May in Glyka Nera, in northeastern Athens, Greece.According to reports, he remained "expressionless" throughout.The 33-year-old had originally claimed his wife Caroline Crouch, 20, was killed when their home was burgled. He attempted to create a convincing crime scene by placing their baby next to her dead mother, according to police.And he is also accused of choking the family dog to death with its lead in his bid to fool investigators.According to reports, he told the court in Athens: "I wish I could go back in time."He apologised for the killing, denied having an accomplice and said the attack had not been planned but had happened in the heat of a row."It was a confessed act and it is a confessed act," his lawyer told reporters.Two lawyers representing Ms Crouch's family have spoken out in support of the case.They said: "We have filed a civil lawsuit representing Caroline's family. For obvious reasons her mother could not come, in the situation she is in, and the statement was made with authorisation."You understand the position of the mother who hugged the hands that took her daughter's breath away. There should be consultation with the perpetrator's family."The lawyers added that Ms Crouch's family has a "good relationship" with the accused's family and are in consultation with them.Ms Crouch's mother is in a good financial situation, her lawyers said, and she has vowed to take care of the couple's daughter on the Greek island of Alonissos.Anagnostopoulos is charged with two offences; intentional homicide and killing of an animal, as well as two misdemeanours; repeated false testimony and false report to the authorities.Analysis of data from a smartwatch worn by Ms Crouch had helped reveal inconsistencies in Anagnostopoulos' original story, police investigators said.The pilot had publicly claimed he and his wife were gagged and tied up after armed robbers broke into their home as their baby daughter slept.He also said the men stole cash before escaping.His story shocked the nation and prompted government officials to announce a 300,000-euro (£257,000) reward for information about the crime.The couple's daughter was unharmed, but the family dog was found choked to death on a leash, and "everything was staged for the crime scene to look like the scene of a robbery," Costas Hassiotis, director of the greater Athens homicide division, told reporters last week.Anagnostopoulos has been taken to prison in Athens where he will share a cell with at least three other inmates.His lawyer said he "wanted to do everything in his power" to make sure his child was taken care of. © 2021 Sky UK
drag me to text box!Caroline Crouch death: Pilot accused of murdering British wife tells Greek court: "I ruined my life"Consumer Resources January 26-27, 2021A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, January 26, 2021, at 1:00 p.m. and continued on Wednesday, January 27, 2021, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Raphael W. Bostic Michelle W. Bowman Lael Brainard Richard H. Clarida Mary C. Daly Charles L. Evans Randal K. Quarles Christopher J. WallerJames Bullard, Esther L. George, Loretta J. Mester, Helen E. Mucciolo, and Eric Rosengren, Alternate Members of the Federal Open Market CommitteePatrick Harker, Robert S. Kaplan, and Neel Kashkari, Presidents of the Federal Reserve Banks of Philadelphia, Dallas, and Minneapolis, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, David Altig, Kartik B. Athreya, Brian M. Doyle, Rochelle M. Edge, Eric M. Engen, Beverly Hirtle, and William Wascher, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountPatricia Zobel, Deputy Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsMatthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsDaniel M. Covitz, Deputy Director, Division of Research and Statistics, Board of Governors; Sally Davies, Deputy Director, Division of International Finance, Board of Governors; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Division of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Division of Board Members, Board of GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis, and Chiara Scotti, Special Advisers to the Board, Division of Board Members, Board of GovernorsJohn J. Stevens, Senior Associate Director, Division of Research and Statistics, Board of Governors; Gretchen C. Weinbach, Senior Associate Director, Division of Monetary Affairs, Board of GovernorsEllen E. Meade and Robert J. Tetlow, Senior Advisers, Division of Monetary Affairs, Board of Governors; Steven A. Sharpe, Senior Adviser, Division of Research and Statistics, Board of GovernorsMarnie Gillis DeBoer and Min Wei, Associate Directors, Division of Monetary Affairs, Board of Governors; Andrew Figura, Associate Director, Division of Research and Statistics, Board of GovernorsEric C. Engstrom, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsJennifer Gallagher, Special Assistant to the Board, Division of Board Members, Board of GovernorsBrian J. Bonis, Assistant Director, Division of Monetary Affairs, Board of GovernorsPenelope A. Beattie, Section Chief, Office of the Secretary, Board of GovernorsMark A. Carlson, Senior Economic Project Manager, Division of Monetary Affairs, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Olesya Grishchenko, Horacio Sapriza, and Fabian Winkler, Principal Economists, Division of Monetary Affairs, Board of Governors; Pablo Cuba-Borda, Principal Economist, Division of International Finance, Board of Governors; Andrew Paciorek, Principal Economist, Division of Research and Statistics, Board of GovernorsRandall A. Williams, Lead Information Manager, Division of Monetary Affairs, Board of GovernorsJoseph W. Gruber, Daleep Singh, and Ellis W. Tallman, Executive Vice Presidents, Federal Reserve Banks of Kansas City, New York, and Cleveland, respectivelyDavid Andolfatto, Spencer Krane, Keith Sill, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of St. Louis, Chicago, Philadelphia, and Minneapolis, respectivelyJoe Peek, Vice President, Federal Reserve Bank of BostonJames Dolmas, Economic Policy Advisor and Senior Research Economist, Federal Reserve Bank of DallasAndrew Foerster, Research Advisor, Federal Reserve Bank of San FranciscoAnnual Organizational Matters3 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 26, 2021, were received and that these individuals executed their oaths of office.The elected members and alternate members were as follows:John C. Williams, President of the Federal Reserve Bank of New York, with Helen E. Mucciolo, First Vice President of the Federal Reserve Bank of New York, as alternateThomas I. Barkin, President of the Federal Reserve Bank of Richmond, with Eric Rosengren, President of the Federal Reserve Bank of Boston, as alternateCharles L. Evans, President of the Federal Reserve Bank of Chicago, with Loretta J. Mester, President of the Federal Reserve Bank of Cleveland, as alternateRaphael W. Bostic, President of the Federal Reserve Bank of Atlanta, with James Bullard, President of the Federal Reserve Bank of St. Louis, as alternateMary C. Daly, President of the Federal Reserve Bank of San Francisco, with Esther L. George, President of the Federal Reserve Bank of Kansas City, as alternateBy unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2022:By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA).By unanimous vote, the Committee selected Lorie K. Logan and Patricia Zobel to serve at the pleasure of the Committee as manager and deputy manager of the SOMA, respectively, on the understanding that these selections were subject to being satisfactory to the Federal Reserve Bank of New York.Secretary's note: The Federal Reserve Bank of New York subsequently sent advice that the manager and deputy manager selections indicated previously were satisfactory.By unanimous vote, the Committee voted to reaffirm without revision the Authorization for Domestic Open Market Operations, the Authorization for Foreign Currency Operations, and the Foreign Currency Directive, as shown below. The Guidelines for the Conduct of System Open Market Operations in Federal-Agency Issues remained suspended.AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS (As reaffirmed effective January 26, 2021)OPEN MARKET TRANSACTIONS1. The Federal Open Market Committee (the "Committee") authorizes and directs the Federal Reserve Bank selected by the Committee to execute open market transactions (the "Selected Bank"), to the extent necessary to carry out the most recent domestic policy directive adopted by the Committee:A. To buy or sell in the open market securities that are direct obligations of, or fully guaranteed as to principal and interest by, the United States, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, that are eligible for purchase or sale under Section 14(b) of the Federal Reserve Act ("Eligible Securities") for the System Open Market Account ("SOMA"):i. As an outright operation with securities dealers and foreign and international accounts maintained at the Selected Bank: on a same-day or deferred delivery basis (including such transactions as are commonly referred to as dollar rolls and coupon swaps) at market prices; orii. As a temporary operation: on a same-day or deferred delivery basis, to purchase such Eligible Securities subject to an agreement to resell ("repo transactions") or to sell such Eligible Securities subject to an agreement to repurchase ("reverse repo transactions") for a term of 65 business days or less, at rates that, unless otherwise authorized by the Committee, are determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual counterparties;B. To allow Eligible Securities in the SOMA to mature without replacement;C. To exchange, at market prices, in connection with a Treasury auction, maturing Eligible Securities in the SOMA with the Treasury, in the case of Eligible Securities that are direct obligations of the United States or that are fully guaranteed as to principal and interest by the United States; andD. To exchange, at market prices, maturing Eligible Securities in the SOMA with an agency of the United States, in the case of Eligible Securities that are direct obligations of that agency or that are fully guaranteed as to principal and interest by that agency.SECURITIES LENDING2. In order to ensure the effective conduct of open market operations, the Committee authorizes the Selected Bank to operate a program to lend Eligible Securities held in the SOMA to dealers on an overnight basis (except that the Selected Bank may lend Eligible Securities for longer than an overnight term to accommodate weekend, holiday, and similar trading conventions).A. Such securities lending must be:i. At rates determined by competitive bidding;ii. At a minimum lending fee consistent with the objectives of the program;iii. Subject to reasonable limitations on the total amount of a specific issue of Eligible Securities that may be auctioned; andiv. Subject to reasonable limitations on the amount of Eligible Securities that each borrower may borrow.B. The Selected Bank may:i. Reject bids that, as determined in its sole discretion, could facilitate a bidder's ability to control a single issue;ii. Accept Treasury securities or cash as collateral for any loan of securities authorized in this paragraph 2; andiii. Accept agency securities as collateral only for a loan of agency securities authorized in this paragraph 2.OPERATIONAL READINESS TESTING3. The Committee authorizes the Selected Bank to undertake transactions of the type described in paragraphs 1 and 2 from time to time for the purpose of testing operational readiness, subject to the following limitations:A. All transactions authorized in this paragraph 3 shall be conducted with prior notice to the Committee;B. The aggregate par value of the transactions authorized in this paragraph 3 that are of the type described in paragraph 1.A.i, 1.B, 1.C and 1.D shall not exceed $5 billion per calendar year; andC. The outstanding amount of the transactions described in paragraphs 1.A.ii and 2 shall not exceed $5 billion at any given time.TRANSACTIONS WITH CUSTOMER ACCOUNTS4. In order to ensure the effective conduct of open market operations, while assisting in the provision of short-term investments or other authorized services for foreign central bank and international accounts maintained at a Federal Reserve Bank (the "Foreign Accounts") and accounts maintained at a Federal Reserve Bank as fiscal agent of the United States pursuant to section 15 of the Federal Reserve Act (together with the Foreign Accounts, the "Customer Accounts"), the Committee authorizes the following when undertaken on terms comparable to those available in the open market:A. The Selected Bank, for the SOMA, to:i. Undertake reverse repo transactions in Eligible Securities held in the SOMA with the Customer Accounts for a term of 65 business days or less; andii. Undertake repo transactions in Eligible Securities with Foreign Accounts; andB. Any Federal Reserve Bank that maintains Customer Accounts, for any such Customer Account, when appropriate and subject to all other necessary authorization and approvals, to:i. Undertake repo transactions in Eligible Securities with dealers with a corresponding reverse repo transaction in such Eligible Securities with the Customer Accounts; andii. Undertake intra-day repo transactions in Eligible Securities with Foreign Accounts.Transactions undertaken with Customer Accounts under the provisions of this paragraph 4 may provide for a service fee when appropriate. Transactions undertaken with Customer Accounts are also subject to the authorization or approval of other entities, including the Board of Governors of the Federal Reserve System and, when involving accounts maintained at a Federal Reserve Bank as fiscal agent of the United States, the United States Department of the Treasury.ADDITIONAL MATTERS5. The Committee authorizes the Chair of the Committee, in fostering the Committee's objectives during any period between meetings of the Committee, to instruct the Selected Bank to act on behalf of the Committee to:A. Adjust somewhat in exceptional circumstances the stance of monetary policy and to take actions that may result in material changes in the composition and size of the assets in the SOMA; orB. Undertake transactions with respect to Eligible Securities in order to appropriately address temporary disruptions of an operational or highly unusual nature in U.S. dollar funding markets.Any such adjustment described in subparagraph A of this paragraph 5 shall be made in the context of the Committee's discussion and decision about the stance of policy at its most recent meeting and the Committee's long-run objectives to foster maximum employment and price stability, and shall be based on economic, financial, and monetary developments since the most recent meeting of the Committee. The Chair, whenever feasible, will consult with the Committee before making any instruction under this paragraph 5.AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS (As reaffirmed effective January 26, 2021)IN GENERAL1. The Federal Open Market Committee (the "Committee") authorizes the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions for the System Open Market Account as provided in this Authorization, to the extent necessary to carry out any foreign currency directive of the Committee:A. To purchase and sell foreign currencies (also known as cable transfers) at home and abroad in the open market, including with the United States Treasury, with foreign monetary authorities, with the Bank for International Settlements, and with other entities in the open market. This authorization to purchase and sell foreign currencies encompasses purchases and sales through standalone spot or forward transactions and through foreign exchange swap transactions. For purposes of this Authorization, foreign exchange swap transactions are: swap transactions with the United States Treasury (also known as warehousing transactions), swap transactions with other central banks under reciprocal currency arrangements, swap transactions with other central banks under standing dollar liquidity and foreign currency liquidity swap arrangements, and swap transactions with other entities in the open market.B. To hold balances of, and to have outstanding forward contracts to receive or to deliver, foreign currencies.2. All transactions in foreign currencies undertaken pursuant to paragraph 1 above shall, unless otherwise authorized by the Committee, be conducted:A. In a manner consistent with the obligations regarding exchange arrangements under Article IV of the Articles of Agreement of the International Monetary Fund (IMF).1B. In close and continuous cooperation and consultation, as appropriate, with the United States Treasury.C. In consultation, as appropriate, with foreign monetary authorities, foreign central banks, and international monetary institutions.D. At prevailing market rates.STANDALONE SPOT AND FORWARD TRANSACTIONS3. For any operation that involves standalone spot or forward transactions in foreign currencies:A. Approval of such operation is required as follows:i. The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the "Subcommittee") must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available.ii. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee.B. Such an operation also shall be:i. Generally directed at countering disorderly market conditions; orii. Undertaken to adjust System balances in light of probable future needs for currencies; oriii. Conducted for such other purposes as may be determined by the Committee.C. For purposes of this Authorization, the overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.WAREHOUSING4. The Committee authorizes the Selected Bank, with the prior approval of the Subcommittee and at the request of the United States Treasury, to conduct swap transactions with the United States Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934 under agreements in which the Selected Bank purchases foreign currencies from the Exchange Stabilization Fund and the Exchange Stabilization Fund repurchases the foreign currencies from the Selected Bank at a later date (such purchases and sales also known as warehousing).RECIPROCAL CURRENCY ARRANGEMENTS, AND STANDING DOLLAR AND FOREIGN CURRENCY LIQUIDITY SWAPS5. The Committee authorizes the Selected Bank to maintain reciprocal currency arrangements established under the North American Framework Agreement, standing dollar liquidity swap arrangements, temporary dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements as provided in this Authorization and to the extent necessary to carry out any foreign currency directive of the Committee.A. For reciprocal currency arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).B. For standing and temporary dollar liquidity swap arrangements all drawings must be approved in advance by the Chair. The Chair may approve a schedule of potential drawings, and may delegate to the manager, System Open Market Account, the authority to approve individual drawings that occur according to the schedule approved by the Chair.C. For standing foreign currency liquidity swap arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).D. Operations involving standing and temporary dollar liquidity swap arrangements and standing foreign currency liquidity swap arrangements shall generally be directed at countering strains in financial markets in the United States or abroad, or reducing the risk that they could emerge, so as to mitigate their effects on economic and financial conditions in the United States.E. For reciprocal currency arrangements, standing and temporary dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements:i. All arrangements are subject to annual review and approval by the Committee;ii. Any new arrangements must be approved by the Committee; andiii. Any changes in the terms of existing arrangements must be approved in advance by the Chair. The Chair shall keep the Committee informed of any changes in terms, and the terms shall be consistent with principles discussed with and guidance provided by the Committee.OTHER OPERATIONS IN FOREIGN CURRENCIES6. Any other operations in foreign currencies for which governance is not otherwise specified in this Authorization (such as foreign exchange swap transactions with private‑sector counterparties) must be authorized and directed in advance by the Committee.FOREIGN CURRENCY HOLDINGS7. The Committee authorizes the Selected Bank to hold foreign currencies for the System Open Market Account in accounts maintained at foreign central banks, the Bank for International Settlements, and such other foreign institutions as approved by the Board of Governors under Section 214.5 of Regulation N, to the extent necessary to carry out any foreign currency directive of the Committee.A. The Selected Bank shall manage all holdings of foreign currencies for the System Open Market Account:i. Primarily, to ensure sufficient liquidity to enable the Selected Bank to conduct foreign currency operations as directed by the Committee;ii. Secondarily, to maintain a high degree of safety;iii. Subject to paragraphs 7.A.i and 7.A.ii, to provide the highest rate of return possible in each currency; andiv. To achieve such other objectives as may be authorized by the Committee.B. The Selected Bank may manage such foreign currency holdings by:i. Purchasing and selling obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof ("Permitted Foreign Securities") through outright purchases and sales;ii. Purchasing Permitted Foreign Securities under agreements for repurchase of such Permitted Foreign Securities and selling such securities under agreements for the resale of such securities; andiii. Managing balances in various time and other deposit accounts at foreign institutions approved by the Board of Governors under Regulation N.C. The Subcommittee, in consultation with the Committee, may provide additional instructions to the Selected Bank regarding holdings of foreign currencies.ADDITIONAL MATTERS8. The Committee authorizes the Chair:A. With the prior approval of the Committee, to enter into any needed agreement or understanding with the Secretary of the United States Treasury about the division of responsibility for foreign currency operations between the System and the United States Treasury;B. To advise the Secretary of the United States Treasury concerning System foreign currency operations, and to consult with the Secretary on policy matters relating to foreign currency operations;C. To designate Federal Reserve System persons authorized to communicate with the United States Treasury concerning System Open Market Account foreign currency operations; andD. From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary and Financial Policies.9. The Committee authorizes the Selected Bank to undertake transactions of the type described in this Authorization, and foreign exchange and investment transactions that it may be otherwise authorized to undertake, from time to time for the purpose of testing operational readiness. The aggregate amount of such transactions shall not exceed $2.5 billion per calendar year. These transactions shall be conducted with prior notice to the Committee.10. All Federal Reserve banks shall participate in the foreign currency operations for System Open Market Account in accordance with paragraph 3G(1) of the Board of Governors' Statement of Procedure with Respect to Foreign Relationships of Federal Reserve Banks dated January 1, 1944.11. Any authority of the Subcommittee pursuant to this Authorization may be exercised by the Chair if the Chair believes that consultation with the Subcommittee is not feasible in the time available. The Chair shall promptly report to the Subcommittee any action approved by the Chair pursuant to this paragraph.12. The Committee authorizes the Chair, in exceptional circumstances where it would not be feasible to convene the Committee, to foster the Committee's objectives by instructing the Selected Bank to engage in foreign currency operations not otherwise authorized pursuant to this Authorization. Any such action shall be made in the context of the Committee's discussion and decisions regarding foreign currency operations. The Chair, whenever feasible, will consult with the Committee before making any instruction under this paragraph.FOREIGN CURRENCY DIRECTIVE (As reaffirmed effective January 26, 2021)1. The Committee directs the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions, for the System Open Market Account, in accordance with the provisions of the Authorization for Foreign Currency Operations (the "Authorization") and subject to the limits in this Directive.2. The Committee directs the Selected Bank to execute warehousing transactions, if so requested by the United States Treasury and if approved by the Foreign Currency Subcommittee (the "Subcommittee"), subject to the limitation that the outstanding balance of United States dollars provided to the United States Treasury as a result of these transactions not at any time exceed $5 billion.3. The Committee directs the Selected Bank to maintain, for the System Open Market Account:A. Reciprocal currency arrangements with the following foreign central banks:B. Standing dollar liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National BankC. Temporary dollar liquidity swap arrangements with the following foreign central banks:Reserve Bank of Australia National Bank of Denmark Reserve Bank of New Zealand Bank of Norway Bank of Sweden Central Bank of Brazil Bank of Mexico Bank of Korea Monetary Authority of SingaporeD. Standing foreign currency liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National Bank4. The Committee directs the Selected Bank to hold and to invest foreign currencies in the portfolio in accordance with the provisions of paragraph 7 of the Authorization.5. The Committee directs the Selected Bank to report to the Committee, at each regular meeting of the Committee, on transactions undertaken pursuant to paragraphs 1 and 6 of the Authorization. The Selected Bank is also directed to provide quarterly reports to the Committee regarding the management of the foreign currency holdings pursuant to paragraph 7 of the Authorization.6. The Committee directs the Selected Bank to conduct testing of transactions for the purpose of operational readiness in accordance with the provisions of paragraph 9 of the Authorization.By unanimous vote, the Committee reaffirmed its Program for Security of FOMC Information with minor technical changes.In the Committee's annual reconsideration of the Statement on Longer-Run Goals and Monetary Policy Strategy, all participants supported the statement as written, and the Committee voted unanimously to reaffirm without revision.STATEMENT ON LONGER-RUN GOALS AND MONETARY POLICY STRATEGY (As reaffirmed effective January 26, 2021)The Federal Open Market Committee (FOMC) is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.Employment, inflation, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays an important role in stabilizing the economy in response to these disturbances. The Committee's primary means of adjusting the stance of monetary policy is through changes in the target range for the federal funds rate. The Committee judges that the level of the federal funds rate consistent with maximum employment and price stability over the longer run has declined relative to its historical average. Therefore, the federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past. Owing in part to the proximity of interest rates to the effective lower bound, the Committee judges that downward risks to employment and inflation have increased. The Committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals.The maximum level of employment is a broad-based and inclusive goal that is not directly measurable and changes over time owing largely to nonmonetary factors that affect the structure and dynamics of the labor market. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the shortfalls of employment from its maximum level, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments.The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.Monetary policy actions tend to influence economic activity, employment, and prices with a lag. In setting monetary policy, the Committee seeks over time to mitigate shortfalls of employment from the Committee's assessment of its maximum level and deviations of inflation from its longer-run goal. Moreover, sustainably achieving maximum employment and price stability depends on a stable financial system. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.The Committee's employment and inflation objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it takes into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.The Committee intends to review these principles and to make adjustments as appropriate at its annual organizational meeting each January, and to undertake roughly every 5 years a thorough public review of its monetary policy strategy, tools, and communication practices.Developments in Financial Markets and Open Market Operations The manager turned first to a discussion of financial market developments. The evolving outlooks for the path of the virus and for fiscal policy were the main drivers of financial markets over the intermeeting period. Progress on vaccinations had been slower than expected, and the near-term trajectory of the pandemic worsened, weighing on economic activity. However, even with the appearance of new strains of the virus, market confidence in the ultimate efficacy of the vaccination efforts seemed to remain high. The emergence of a narrow Democratic majority in the Senate bolstered investor expectations for additional fiscal stimulus, prompting upward revisions to forecasts for economic growth this year. In the Open Market Desk Survey of Primary Dealers, the median 2021 gross domestic product (GDP) growth forecast rose about 1 percentage point.Against this backdrop, longer-term Treasury yields rose notably over the period. Longer-dated real yields were lifted by expectations for improved growth and increased Treasury issuance, but remained deeply negative. Measures of inflation compensation increased over the period, with the five-year, five-year-forward measure rising to a level of around 2 percent. Overall financial conditions eased further, on net, as the recent rally in risk assets continued. Gains in U.S. equities again centered on cyclical sectors and smaller-capitalization firms most sensitive to growth. Credit spreads narrowed further, especially for riskier borrowers.Expectations for the path of the target federal funds rate over the next several years, as implied by interest rate futures and by the Desk Survey of Primary Dealers and Survey of Market Participants, were relatively little changed from December. The stability in near-term policy rate expectations amid an improving growth outlook appeared consistent with the Committee's new framework and forward interest rate guidance. Although the median Desk survey respondent continued to expect 12‑month personal consumption expenditure (PCE) inflation of 2.3 percent when the FOMC first lifts the target range, the median expectation for the unemployment rate prevailing at that time was modestly lower than in December. The Desk survey results indicated that a majority of market participants anticipated that the pace of net asset purchases would remain stable for the remainder of the year and slow around the first quarter of 2022.The manager next discussed conditions in funding markets. Over the year-end, overnight secured and unsecured rates were little changed at rates just below the interest on excess reserves (IOER) rate even as financial firms managed their balance sheets for the reporting date. Going forward, reserves were projected to rise rapidly through the summer, reflecting ongoing Federal Reserve asset purchases as well as expected declines in balances held in the Treasury General Account. Market pricing suggested that the effective federal funds rate was expected to decline modestly through the second quarter. Even if more notable downward pressure on money market rates emerged, the manager anticipated that the Federal Reserve's tools, including the IOER rate and overnight reverse repurchase agreement facility, would continue to provide effective control over the federal funds rate and other overnight money market rates.Finally, the manager discussed Desk operations. A range of indicators suggested that both fixed-income and funding markets continued to function smoothly over the period. The manager noted that, in the coming period, the Desk anticipated implementing two adjustments to continue to normalize operations. First, given the sustained stability in term repurchase markets, the Desk proposed discontinuing the weekly one-month term repurchase operations, beginning in mid-February. In addition, the Desk planned to reduce the frequency of agency commercial mortgage-backed securities (CMBS) operations in light of the sustained improvement in market conditions for these securities.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The COVID‑19 pandemic and the measures undertaken to contain its spread continued to affect economic activity in the United States and abroad. The information available at the time of the January 26–27 meeting suggested that U.S. real GDP had continued to advance in the fourth quarter of 2020, albeit at a pace that was markedly slower than the rapid rate seen in the third quarter, while the level of real GDP had not yet returned to the level seen before the onset of the pandemic. Labor market conditions deteriorated, on balance, in December, and employment continued to be well below its level at the start of 2020. Consumer price inflation through November—as measured by the 12‑month percentage change in the PCE price index—remained considerably lower than the rates seen in early 2020.Total nonfarm payroll employment fell in December, with especially sharp declines in the leisure and hospitality sector. As of December, payroll employment had retraced a little more than half of the losses seen at the onset of the pandemic. The unemployment rate held steady at 6.7 percent in December. The unemployment rate for African Americans declined and the Hispanic unemployment rate rose; both rates remained well above the national average. However, the Asian unemployment rate moved below the national average in December. Both the labor force participation rate and employment-to-population ratio were unchanged in December. Initial claims for unemployment insurance in mid-January were higher than their early December level. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP indicated that the four-week average change in private employment in mid-January was slightly lower than it had been in early December; however, the most recent week-to-week changes in this measure of payrolls had been highly volatile.Average hourly earnings for all employees rose 5.1 percent over the 12 months ending in December, a gain that was noticeably higher than the measure's year‑earlier 12‑month change. The 12‑month change in average hourly earnings continued to be dominated by changes in the composition of the workforce, with the concentration of job losses among lower-wage workers over the pandemic period resulting in outsized increases in this measure of earnings that were not indicative of tight labor market conditions. By contrast, a staff measure of the 12‑month change in the median wage derived from the ADP data—a measure likely to have been less affected by changes in workforce composition—was 3-1/2 percent in December and remained well below its pre‑pandemic pace.Total PCE price inflation was 1.1 percent over the 12 months ending in November and continued to be held down by relatively weak aggregate demand and the declines in consumer energy prices seen over the first part of 2020. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 1.4 percent over the 12 months ending in November, while the trimmed mean measure of 12‑month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.7 percent in November. In December, the 12‑month change in the consumer price index (CPI) was 1.4 percent, while core CPI inflation was 1.6 percent over the same period. The latest readings on survey-based measures of longer-run inflation expectations ticked higher. In the first part of January, the University of Michigan Surveys of Consumers measure for the next 5 to 10 years moved back up to its late‑summer level, while in December, the 3‑year‑ahead measure of inflation expectations produced by the Federal Reserve Bank of New York moved back up to its August level.Real PCE fell in November, and available indicators—including the components of the nominal retail sales data used to estimate PCE—pointed to a further decline in December. Housing starts and construction permits moved up in November and December and finished the year well above their pre‑pandemic levels. Although home sales turned down in November, the decline appeared to reflect limited availability of homes for sale rather than weakening demand.Available indicators pointed to a strong increase in investment in equipment and intangibles in the fourth quarter of 2020, as this component of capital spending recovered from its sharp decline over the first half of the year. Likewise, drilling investment appeared to have turned up sharply, albeit from a low level, as oil prices moved higher. By contrast, investment in nonresidential structures outside of the drilling and mining sector appeared to have declined further in the fourth quarter and had likely been restrained by firms' continued hesitation to commit to projects with lengthy times to completion and uncertain future returns.Industrial production advanced further in the fourth quarter, led by a solid gain in manufacturing output, but had not yet overtaken its pre‑pandemic level. The low level of export demand since the onset of the pandemic had likely continued to restrain the recovery in the manufacturing sector; in addition, production of motor vehicles and parts was a small drag on manufacturing output in the fourth quarter as automotive producers appeared to have had difficulty getting assemblies fully under way for the new model year.Total real government purchases appeared to have fallen further in the fourth quarter, though at a slower pace than in the third quarter. Available data suggested that real federal purchases had posted a modest gain, as an increase in defense purchases offset a reduction in nondefense purchases; however, indicators of real state and local purchases, including state and local government employment, pointed to a fourth-quarter decline similar in size to what had been seen in the third quarter.The nominal U.S. international trade deficit widened further in November. Both imports and exports continued to rebound from their collapse in the first half of the year. Goods imports rose in November to a level well above that of the previous January, with gains in most major categories. Although exports also grew in November, they had not yet recovered to their January 2020 level. Services trade continued a gradual rise but remained depressed, driven by the continued suspension of most international travel. Taken together, these data suggested that net exports made a significant negative contribution to real GDP growth in the fourth quarter.Recent data pointed to a sharp slowing in foreign economic growth in the fourth quarter, after a strong rebound in the third quarter. Amid a further intensification of the pandemic, many foreign governments tightened social-distancing restrictions. In a few countries, the emergence of new and more contagious virus strains was accompanied by a surge in COVID-19 cases and deaths. The increased virus spread and restrictions appeared to take a toll on foreign economic activity, particularly in Europe. The global slowdown was most notable for services, with further declines in purchasing managers indexes for this sector through January in many advanced foreign economies. By contrast, manufacturing output in both advanced and emerging foreign economies continued to expand at a solid pace, supported by resilient demand for durable goods, high-tech goods, and medical supplies. Amid the generally weak economic situation, inflationary pressures remained subdued in most foreign economies.Staff Review of the Financial Situation Investor sentiment improved and risk asset prices moved higher over the intermeeting period on greater prospects for additional fiscal stimulus. Domestic and foreign equity prices increased notably, and spreads on corporate and municipal bonds narrowed. The nominal Treasury yield curve steepened, partly reflecting an increase in inflation compensation. Market-based financing conditions remained accommodative, while bank lending conditions continued to be tight. However, a smaller net share of banks tightened lending standards than in previous quarters.A straight read of overnight index swap (OIS) quotes suggested that the expected path of the federal funds rate beyond mid-2023 rose moderately over the intermeeting period, with the increases reportedly associated largely with greater investor optimism regarding the expected speed of the economic recovery. OIS quotes suggested that the expected policy rate would remain below 25 basis points until the third quarter of 2023, little changed from the time of the December meeting.The yield on 2-year nominal Treasury securities was little changed over the intermeeting period, while the 10-year yield rose notably. Most of the steepening of the Treasury yield curve occurred following the outcome of the Georgia runoff elections, which reportedly bolstered market participants' expectations for additional fiscal stimulus. The FOMC's updated guidance around asset purchases was seen as broadly in line with expectations and did not elicit noticeable financial market reaction. Measures of inflation compensation based on Treasury Inflation-Protected Securities increased moderately, on net, continuing the upward trend observed over recent months, with the increase over the intermeeting period reportedly reflecting greater prospects for additional fiscal stimulus and an associated improvement in the longer-run economic outlook.Broad stock price indexes increased, on net, over the intermeeting period, boosted by gains in the share prices of banks and companies in more cyclically sensitive sectors, reportedly reflecting, in part, increased expectations of fiscal stimulus. One-month option-implied volatility on the S&P 500—the VIX—was little changed, on net, remaining modestly elevated relative to its range over the past several years. Consistent with the optimism driving stock prices, spreads on corporate bond yields over comparable-maturity Treasury yields narrowed somewhat. Spreads on municipal bond yields narrowed notably in January, reportedly reflecting increased expectations of additional fiscal stimulus and aid to state and local governments.Conditions in short-term funding markets remained stable over the intermeeting period, including over the year-end. Spreads for commercial paper and negotiable certificates of deposit across tenors were largely unchanged at historically low levels. Commercial paper outstanding declined somewhat in late December but quickly rebounded in early January to the levels observed before year-end. Amid stable market conditions, there was no take-up at the Commercial Paper Funding Facility or the Money Market Mutual Fund Liquidity Facility over the intermeeting period. Assets under management (AUM) of government money market funds (MMFs) remained stable over the intermeeting period. AUM of prime MMFs continued to decline, reaching the lowest level since late 2018, likely reflecting the compressed net yield advantage for prime funds relative to yields for government funds. The net yields of both prime and government MMFs remained near historically low levels.The effective federal funds rate and the Secured Overnight Financing Rate were little changed, averaging 9 basis points and 8 basis points, respectively, over the intermeeting period. There continued to be no participation in the Fed's repurchase agreement (repo) operations, and participation in the Fed's reverse repo facility was minimal.In foreign financial markets, the prospect of additional U.S. fiscal stimulus and the passage of key risk events such as the Brexit trade agreement largely outweighed investor concerns around new virus strains and the sluggish global vaccine rollout. On balance, foreign equity prices increased moderately, with notable outperformance in some Asian indexes, and capital inflows into mutual funds dedicated to emerging markets continued at a robust pace. Longer-term sovereign yields in most advanced foreign economies rose slightly on improved investor sentiment even while several major central banks reaffirmed their commitment to continue or possibly expand accommodative policies. The broad dollar index was little changed, on net, over the intermeeting period, while the Chinese renminbi appreciated notably against the dollar as data showed a robust economic recovery in China. Dollar funding conditions were generally stable around year-end.Financing conditions in capital markets remained broadly accommodative, supported by low interest rates and high equity valuations. Gross corporate bond issuance was fairly strong in November and December, and seasoned and initial public offerings in the equity markets were robust. Gross institutional leveraged loan issuance was also strong in December, as issuance volumes excluding refinancing topped their averages for previous months of 2020 and were above those observed during the same period of 2019.Commercial and industrial (C&I) loan balances at banks continued to decline in December, albeit at a slower pace than in the fall. C&I loans declined in the fourth quarter because of weak origination activity, loan forgiveness at the Paycheck Protection Program, and continued repayments of bank debt. In the January Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), banks, on net, reported weaker demand and tightened lending standards for C&I loans, with notable differences in reported changes across bank sizes. Large banks reported having eased standards to large and middle-market firms, while, on net, banks of all sizes reported having tightened standards to small firms. However, a smaller net percentage of banks tightened lending standards to firms of all sizes than in previous quarters.The credit quality of nonfinancial corporations remained stable in recent months after deteriorating substantially for several months following the onset of the pandemic. The volume of nonfinancial corporate bond downgrades continued to slightly outpace upgrades in November and December, and the monthly volume of nonfinancial corporate bond defaults remained relatively low. Market indicators of future default expectations moved slightly lower, essentially returning to their pre-pandemic levels.Financing conditions for small businesses remained tight, but small business loan originations in November, the most recent month for which data were available, were at roughly the level seen a year earlier, likely supported by the refinancing of existing loans. Meanwhile, liquidity needs of small businesses remained high as businesses continued to operate at reduced capacity. Small business delinquency and default rates were little changed but remained elevated relative to the levels of recent years. Financing conditions in the municipal bond market remained generally accommodative over the intermeeting period, and the credit quality of municipal debt remained roughly stable.For commercial real estate (CRE) financed through capital markets, financing conditions remained generally accommodative, easing further over the intermeeting period. Spreads on agency CMBS ticked down, on net, and issuance remained elevated through December, although below its recent historical high in October. Risk spreads on triple-B non-agency CMBS declined, and spreads on triple-A non-agency CMBS stayed close to their historical lows. Issuance of non-agency CMBS remained somewhat below its pre-pandemic level. CRE bank loan growth remained weak in the fourth quarter amid depressed property transaction volumes. On net, in the January SLOOS, banks reported a further tightening of lending standards and further weakening in demand for CRE loans.Financing conditions in the residential mortgage market were little changed over the intermeeting period. Mortgage rates ticked up slightly but stayed near historically low levels, supporting strong loan origination activity. Credit remained broadly available to higher-score borrowers seeking conforming mortgages but tightened further, from already tight levels, for borrowers with lower credit scores and those seeking nonconforming mortgages. The January SLOOS suggested that for most types of residential mortgages, banks' lending standards remained unchanged, while loan demand was either little changed or somewhat stronger. Mortgage forbearance rates plateaued in December and early January after having gradually declined over the previous six months, and the rate of new delinquencies stayed at low, pre-pandemic levels.Financing conditions in consumer credit markets generally remained accommodative for borrowers with strong credit scores but tight for those with subprime scores. Banks in the January SLOOS reported easing standards for all consumer loan types and experiencing weaker demand for auto loans and little-changed demand for other consumer loans. Conditions in the asset-backed securities market appeared supportive of lending. Credit card balances edged down further for both prime and nonprime borrowers, likely reflecting weak consumer spending. However, the volume of new cards and available credit continued to rise for both prime and nonprime borrowers. Interest rates on new credit card offers for nonprime borrowers stayed elevated, and financing conditions remained tight for those borrowers. Auto loan balances continued to increase solidly for prime and near-prime borrowers but declined further for subprime borrowers. Auto loan interest rates were about flat over the past few months and remained significantly below their pre-pandemic levels. Delinquency rates for nonprime auto and credit card borrowers ticked up, albeit from very low levels.The staff provided an update on its assessments of the stability of the financial system and, on balance, characterized the financial vulnerabilities of the U.S. financial system as notable. The staff assessed asset valuation pressures as elevated. In particular, corporate bond spreads had declined to pre-pandemic levels, which were at the lower ends of their historical distributions. In addition, measures of the equity risk premium declined further, returning to pre-pandemic levels. Prices for industrial and multifamily properties continued to grow through 2020 at about the same pace as in the past several years, while prices of office buildings and retail establishments started to fall. The staff assessed vulnerabilities associated with household and business borrowing as notable, reflecting increased leverage and decreased incomes and revenues in 2020. Small businesses were hit particularly hard. The staff judged that vulnerabilities stemming from financial leverage were moderate, noting that capital ratios at the largest bank holding companies rose over the course of last year; leverage among hedge funds was elevated but it did decline last spring for the most highly leveraged funds. The staff characterized vulnerabilities stemming from funding risks as moderate. Banks continued to maintain significant levels of high-quality liquid assets and stable sources of funding. In contrast, money market funds and open-ended mutual funds were characterized by significant vulnerabilities associated with liquidity transformation.Staff Economic Outlook The U.S. economic projection prepared by the staff for the January FOMC meeting implied a considerably stronger outlook for activity in 2021 relative to the December forecast. Although incoming data had been weaker than expected, the staff's January projection incorporated the effects of the stimulus in the recently enacted Consolidated Appropriations Act, 2021 (CAA), together with an assumption that an additional sizable tranche of fiscal support would be put into place in coming months. Taken together, these stimulus measures were expected to partly offset the substantial drag on aggregate demand that would result from the unwinding of the fiscal stimulus enacted in the spring of 2020. The staff's projection continued to anticipate that widespread vaccination would allow for an easing in social distancing in 2021. With the boost to growth from the reduction in social distancing assumed to be largely completed by the end of 2021, GDP growth was expected to step down over the remainder of the medium term. Even so, the staff continued to project that real GDP growth would outpace that of potential over this period, leading to a considerable further decline in the unemployment rate.The 12‑month changes in total and core PCE prices in coming months were projected to briefly move above 2 percent in the second quarter of 2021 as the unusually low observations from the spring of 2020 drop out of the 12-month calculation. Following these swings, inflation was expected to finish the year at just below 2 percent. Thereafter, inflation was projected to gradually edge up to 2 percent by the end of the medium term as labor and product markets tightened. With monetary policy assumed to remain accommodative, inflation was projected to moderately overshoot 2 percent for some time in the years beyond 2023.The staff viewed the possibility that a larger-than-anticipated fiscal package would be enacted in coming months as a modest upside risk to the baseline economic outlook. However, the further rise in COVID‑19 cases in the United States, coupled with developments such as the emergence of more-contagious strains of the virus in the United States and elsewhere, led the staff to continue to judge that the risks to the baseline projection were skewed to the downside and that the uncertainty around the forecast was elevated.Participants' Views on Current Conditions and the Economic Outlook Participants noted that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment had moderated in recent months, with weakness concentrated in the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing. Weaker demand and earlier declines in oil prices were holding down consumer price inflation. Overall financial conditions remained accommodative, in part reflecting the Federal Reserve's actions to support the economy and the flow of credit to U.S. households and businesses. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis would continue to weigh on economic activity, employment, and inflation and posed considerable risks to the economic outlook.Participants observed that the resurgence in COVID-19 infections and associated social-distancing measures were restraining activity in some sectors, particularly in industries such as travel and leisure and hospitality. Most participants expected that the stimulus provided by the passage of the CAA in December, the likelihood of additional fiscal support, and anticipated continued progress in vaccinations would lead to a sizable boost in economic activity. Even so, participants noted that economic activity and employment were currently well below levels consistent with achieving maximum employment.Participants commented on improved prospects for household spending over the course of the year, in part reflecting fiscal support. They saw progress on vaccinations as essential for supporting further gains in aggregate consumer spending and for the economic recovery more generally. In commenting on recent data for household spending, most participants discussed the composition of expenditures, with strong spending on many goods, especially durables, and weakness in spending on some services, especially in travel and in leisure and hospitality. The relative strength in consumer spending on goods was supported by fiscal programs such as federal stimulus payments and expanded unemployment benefits as well as by accommodative monetary policy. The weakness in services spending was largely attributed to the pandemic and associated social-distancing measures, which limited spending on services that depend heavily on in-person contact. Increased government transfers to households, combined with reduced outlays on some services, had contributed to a historically large increase in aggregate household savings last year. Participants also observed that residential investment and home sales remained robust; low interest rates were viewed as an important factor supporting the strength in housing activity.Most participants noted that the economic downturn had not fallen equally on all Americans and that those least able to shoulder the burden—in particular, lower-income and Black and Hispanic households—had been the hardest hit by the pandemic. Many participants stressed that sustained support from fiscal policy would help address the hardships faced by these groups and that monetary policy could also help by promoting the economy's return to maximum employment and price stability.In their remarks on the business sector, participants commented that business equipment investment had continued to show strength while nonresidential construction remained weak. Participants also discussed the recent strong performance of the manufacturing sector. Many discussed supply chain issues in manufacturing, including those associated with acquiring material inputs and pandemic-related worker shortages and absenteeism. Business contacts reported that firms in goods-producing industries, particularly larger firms and those in the durable goods or housing sectors, were adapting to the pandemic; in contrast, smaller firms and those in industries most adversely affected by the pandemic were finding it more difficult to adapt. Many participants stated that their business contacts were optimistic that continued progress on vaccinations, together with further fiscal support, would result in more improvement in overall business conditions. Several participants noted the increase in agricultural crop prices over 2020 and the associated improvement in farm revenues.As with overall economic activity, the pace of improvement in the labor market had slowed in recent months. Payroll employment fell in December, as continued job gains in many industries were outweighed by significant layoffs in industries where the resurgence of the virus had weighed heavily on activity. While labor market conditions had improved significantly, on balance, since the spring, some participants noted that if the sizable number of workers who reported having left the labor force since the beginning of the pandemic were to be counted as unemployed, the unemployment rate would be substantially higher. Participants judged that the current low level of labor force participation likely reflected a number of factors, including health concerns and additional childcare responsibilities. Over the medium term, participants expected strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy. However, participants observed that the economy was far from achieving the Committee's broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time.In their comments about inflation, participants noted that headline PCE price inflation in December, measured on a 12-month basis, was poised to come in well below the Committee's 2 percent longer-term objective. In the relatively near term, a number of participants suggested that there could be increases in the prices of some goods whose production has been subject to supply chain constraints, or soon could be; others anticipated that a possibly abrupt return to normal levels of activity could result in one-time increases in certain prices. Many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation, noting that changes in relative prices could temporarily raise measured inflation but would be unlikely to have a lasting effect. Some participants further observed that 12-month PCE inflation was likely to move somewhat above 2 percent for a brief period in the spring as the unusually low monthly observations from last spring roll out of the 12-month calculation. Outside of such near-term fluctuations, participants generally anticipated that inflation would move up along a trajectory consistent with achieving the Committee's objectives over time, supported by stronger economic activity, widespread vaccinations and the associated reduction in social distancing, and accommodative fiscal and monetary policy. Some participants pointed to the continued increase in market-based measures of inflation compensation from the very low levels recorded in the spring as consistent with the view that inflation was likely to move up gradually over time; others noted that survey-based measures were little changed, on net, over the year as a whole.Participants noted that overall financial conditions remained highly accommodative, in part reflecting investors' optimism about the economic outlook along with the accommodative stance of monetary policy and recent and expected future fiscal policy measures. However, a few participants remarked that credit conditions were relatively tight for borrowers with low credit scores and for some small and medium-sized businesses that rely on bank lending rather than capital markets to meet their financing needs.While generally acknowledging that the medium-term outlook for real GDP growth and employment had improved, participants continued to see the uncertainty surrounding that outlook as elevated. Participants agreed that the path of the economy depended significantly on the course of the virus and progress on vaccinations. Many participants remarked that the pandemic continued to pose considerable risks to the economic outlook, including risks associated with new virus strains, potential public resistance to vaccination, and potential difficulties in the production and distribution of vaccines. With regard to upside risks, some participants pointed to the possibility that fiscal policy could turn out to be more expansionary than anticipated, that households could display greater willingness to spend out of accumulated savings than expected, or that widespread vaccinations and easing of social distancing could result in a more rapid boost to spending and employment than anticipated. Participants generally viewed the risks to the outlook for inflation as having become more balanced than was the case over most of 2020, although most still viewed the risks as weighted to the downside. As an upside risk to inflation, several participants noted the potential for pandemic-related supply constraints to affect price inflation somewhat more than anticipated or for price increases among industries most adversely affected by the pandemic to be more pronounced than projected.A number of participants commented on issues related to financial stability. Several participants noted areas of strength. For example, the banking system had shown considerable resilience since the onset of the pandemic. Banks' capital positions had generally remained solid, and earnings were strong. In addition, results from the most recent stress tests indicated that the largest banks could withstand very stressed economic conditions. That said, a few participants stated that it would be important to stay vigilant to ensure that the banking system remained strong and resilient. In addition, several participants noted that the pandemic had highlighted structural vulnerabilities in other parts of the financial system. These included run-prone investment funds in short-term funding and credit markets as well as fragilities in Treasury market functioning; stresses stemming from these vulnerabilities had required substantial intervention by the Federal Reserve in the turbulent market conditions at the onset of the pandemic. A couple of participants commented that it would be important for the appropriate regulatory bodies to address these financial stability vulnerabilities. Regarding asset valuations, some participants commented that equity valuations had risen further, that initial public offering activity was elevated, or that valuations might have been affected by retail investors trading through electronic platforms. In addition, risk spreads on corporate bonds and loans were generally low, even with corporate indebtedness having risen to high levels. A few participants noted that some CRE in sectors that had been most directly affected by the pandemic—such as those involving retail establishments and hotels—faced the prospect of falling prices and increased stress.In their consideration of monetary policy at this meeting, participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time, thereby promoting the Committee's statutory goals of maximum employment and price stability. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis had continued to weigh on economic activity, employment, and inflation. Participants noted that as the pandemic had worsened across the country in recent months, the pace of the recovery had moderated, with weakness concentrated in the sectors most adversely affected by the pandemic. In contrast, participants remarked that the prospect of an effective vaccine program, the recently enacted fiscal support, and the potential for additional fiscal actions had led them to judge that the medium-term outlook had improved. That said, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook.In their discussion of the outlook for monetary policy, participants judged that maintaining a highly accommodative stance of policy was essential to foster further economic recovery and to achieve an average inflation rate of 2 percent over time. Participants noted that economic conditions were currently far from the Committee's longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved. Consequently, all participants supported maintaining the Committee's current settings and outcome-based guidance for the federal funds rate and the pace of asset purchases.Participants noted that the Committee's current guidance was well suited to the current environment because it describes how policy would respond based on the path of the economy. For example, if progress toward the Committee's goals proved slower than anticipated, the outcome-based guidance would convey the Committee's intention to respond by increasing monetary policy accommodation through maintaining the current level of the target range of the federal funds rate for longer and raising the expected path of the Federal Reserve's balance sheet. In addition, participants noted that the Committee's current outcome-based guidance for both the federal funds rate and balance sheet appeared to be well understood by the public. In that context, participants emphasized that it was important to abstract from temporary factors affecting inflation—such as low past levels of prices dropping out of measures of annual price changes or relative price increases in some sectors brought about by supply constraints or disruptions—in judging whether inflation was on track to moderately exceed 2 percent for some time.Participants noted that the increase in the Federal Reserve's balance sheet since last March had materially eased financial conditions and was providing substantial support to the economy. The Committee's guidance for asset purchases indicated that asset purchases would continue at least at the current pace until substantial further progress toward its employment and inflation goals had been achieved. With the economy still far from those goals, participants judged that it was likely to take some time for substantial further progress to be achieved. Various participants noted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of purchases.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. They noted that the pace of recovery in economic activity and employment had moderated in recent months, with weakness concentrated in sectors most adversely affected by the pandemic. Weaker demand and earlier declines in oil prices had been holding down consumer price inflation. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Members also stated that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. In addition, members agreed that the ongoing public health crisis had continued to weigh on economic activity, employment, and inflation and was posing considerable risks to the economic outlook.Members agreed that the pandemic continued to pose considerable risks to the outlook. Nonetheless, in light of the expected progress on vaccinations and the change in the outlook for fiscal policy, the medium-term prospects for the economy had improved enough that members decided that the reference in previous post-meeting statements to risks to the economic outlook over the medium term was no longer warranted.Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals. All members reaffirmed that, in accordance with the Committee's goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run and with inflation running persistently below this longer-run goal, they would aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. Members expected to maintain an accommodative stance of monetary policy until those outcomes were achieved.All members agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent, and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time.In addition, members agreed that it would be appropriate for the Federal Reserve to continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made toward the Committee's maximum-employment and price-stability goals. They judged that these asset purchases would help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook and that they would be prepared to adjust the stance of monetary policy as appropriate in the event that risks emerged that could impede the attainment of the Committee's goals. Members also agreed that, in assessing the appropriate stance of monetary policy, they would take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective January 28, 2021, the Federal Open Market Committee directs the Desk to:The vote also encompassed approval of the statement below for release at 2:00 p.m.:"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective January 28, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, March 16–17, 2021. The meeting adjourned at 10:25 a.m. on January 27, 2021.Notation Vote By notation vote completed on January 5, 2021, the Committee unanimously approved the minutes of the Committee meeting held on December 15–16, 2020. _______________________ James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended through the discussion of developments in financial markets and open market operations. Return to text3. Committee organizational documents are available at www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. Return to text1. In general, as specified in Article IV, each member of the IMF undertakes to collaborate with the IMF and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. These obligations include seeking to direct the member's economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability. These obligations also include avoiding manipulating exchange rates or the international monetary system in such a way that would impede effective balance of payments adjustment or to give an unfair competitive advantage over other members. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2021 01 27Consumer Resources March 16-17, 2021A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, March 16, 2021, at 11:00 a.m. and continued on Wednesday, March 17, 2021, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Raphael W. Bostic Michelle W. Bowman Lael Brainard Richard H. Clarida Mary C. Daly Charles L. Evans Randal K. Quarles Christopher J. WallerJames Bullard, Esther L. George, Loretta J. Mester, and Eric Rosengren, Alternate Members of the Federal Open Market CommitteePatrick Harker, Robert S. Kaplan, and Neel Kashkari, Presidents of the Federal Reserve Banks of Philadelphia, Dallas, and Minneapolis, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, Kartik B. Athreya, Brian M. Doyle, Rochelle M. Edge, Eric M. Engen, Sylvain Leduc, Anna Paulson, and William Wascher, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountPatricia Zobel, Deputy Manager, System Open Market AccountMatthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsMargie Shanks, Deputy Secretary, Office of the Secretary, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Division of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Division of Board Members, Board of GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis, and Chiara Scotti, Special Advisers to the Board, Division of Board Members, Board of GovernorsElizabeth Klee, Senior Associate Director, Division of Financial Stability, Board of Governors; David E. Lebow and Michael G. Palumbo, Senior Associate Directors, Division of Research and Statistics, Board of GovernorsDon H. Kim and Ellen E. Meade, Senior Advisers, Division of Monetary Affairs, Board of GovernorsGlenn Follette, Associate Director, Division of Research and Statistics, Board of Governors; David López-Salido, Associate Director, Division of Monetary Affairs, Board of GovernorsStephanie E. Curcuru, Deputy Associate Director, Division of International Finance, Board of Governors; Christopher J. Gust, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Norman J. Morin and Paul A. Smith, Deputy Associate Directors, Division of Research and Statistics, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsJennifer Gallagher, Special Assistant to the Board, Division of Board Members, Board of GovernorsBrian J. Bonis, Michiel De Pooter, and Zeynep Senyuz,2 Assistant Directors, Division of Monetary Affairs, Board of GovernorsAlyssa G. Anderson,2 Section Chief, Division of Monetary Affairs, Board of Governors; Penelope A. Beattie,2 Section Chief, Office of the Secretary, Board of GovernorsMark A. Carlson, Senior Economic Project Manager, Division of Monetary Affairs, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Sebastian Infante, and Ander Perez-Orive, Principal Economists, Division of Monetary Affairs, Board of GovernorsRandall A. Williams, Lead Information Manager, Division of Monetary Affairs, Board of GovernorsAnthony Sarver,2 Senior Financial Institution Policy Analyst, Division of Monetary Affairs, Board of GovernorsEllen J. Bromagen, First Vice President, Federal Reserve Bank of ChicagoMichael Dotsey, Executive Vice President, Federal Reserve Bank of PhiladelphiaAnne Baum, Edward S. Knotek II, Giovanni Olivei, Paula Tkac, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of New York, Cleveland, Boston, Atlanta, and Minneapolis, respectivelyKathryn B. Chen2 and Jonathan P. McCarthy, Vice Presidents, Federal Reserve Bank of New YorkBrett Rose,2 Assistant Vice President, Federal Reserve Bank of New YorkAnthony Murphy, Senior Economic Policy Advisor, Federal Reserve Bank of DallasBrent Bundick, Research and Policy Advisor, Federal Reserve Bank of Kansas CityMichael Koslow,2 Markets Officer, Federal Reserve Bank of New YorkFernando M. Martin, Research Officer, Federal Reserve Bank of St. LouisWilliam G. O'Boyle,2 Policy and Markets Manager, Federal Reserve Bank of New YorkMichael Junho Lee,2 Economist, Federal Reserve Bank of New YorkAction to Adopt Changes to the Committee's Rules Regarding Availability of Information By unanimous vote, the Committee approved a final rule that revises its Rules Regarding Availability of Information, which are the Committee's Freedom of Information Act (FOIA) rules. The revised FOIA rules, which include a range of minor and technical updates, will become effective 30 days after the forthcoming publication of the final rule in the Federal Register.Developments in Financial Markets and Open Market Operations The manager turned first to a discussion of financial market developments. In the United States, the trend toward higher longer-term yields observed in recent months accelerated over the intermeeting period, and far-forward real rates based on Treasury Inflation-Protected Securities (TIPS) rose considerably. Market participants highlighted an improving economic outlook, bolstered by passage of the American Rescue Plan (ARP) and progress on vaccinations, as underlying the increase in yields. Model- and survey-based estimates suggested that a significant portion of the increase in yields was associated with an increase in term premiums. Higher term premiums could reflect the outlook for more expansive fiscal policy and an associated upward revision in the expected path for Treasury debt outstanding. Increased uncertainty over the outlook for longer-term interest rates as well as technical factors may also have contributed to the rise in term premiums. The Treasury market functioned well over most of the period, although measures of market liquidity deteriorated somewhat toward the end of February. Conditions gradually improved, although some measures of market liquidity had not fully returned to earlier levels.Rates implied by interest rate futures maturing over the next several years rose notably over the intermeeting period, reportedly reflecting a reassessment by market participants of the expected path of the target range for the federal funds rate. Since the January meeting, the date of the first increase in the target range for the federal funds rate implied by a straight read of market pricing moved notably earlier to the first quarter of 2023, and the implied target rate at the end of 2023 rose around 50 basis points. However, responses to the Open Market Desk surveys suggested more modest changes to policy rate expectations. The probability-weighted mean survey expectation for the target rate at the end of 2023 rose only around 5 basis points.Expectations for economic conditions at the time of the first increase in the target range, as measured by the Desk surveys, appeared to remain broadly consistent with the Committee's policy framework and forward guidance. Expectations from the Desk surveys for the path of asset purchases were little changed. Contacts noted that these expectations have been held steady by policymaker communications emphasizing both the need to see realized progress toward the Committee's goals and the intent to communicate well in advance of the time when progress could be judged substantial enough to warrant a change in the pace of purchases.Alongside the rise in U.S. yields, broad U.S. equity price indexes increased moderately, with the largest gains in cyclically sensitive sectors. The rise in U.S. yields was also accompanied by increases in sovereign yields in other advanced economies. Some central banks responded to these yield increases with adjustments to operations; others suggested that the rising yields reflected improvements in the outlook.The deputy manager discussed the evolution of the Federal Reserve's balance sheet and related developments in money markets. Reserve balances rose more than $400 billion, on net, over the intermeeting period to $3.7 trillion, while Treasury bills outstanding decreased more than $200 billion. Against this backdrop, the effective federal funds rate softened modestly, while repurchase agreement (repo) rates declined to a greater extent. Moreover, market participants projected that reserves would grow at a historically rapid pace in coming months, reflecting continued expansion of the Federal Reserve's balance sheet along with a projected drawdown in the balances maintained in the Treasury General Account. Market contacts suggested that continued rapid expansion of reserves could put further downward pressure on money market rates. The deputy manager noted that the earliest and most pronounced pressure was likely to be observed in overnight secured financing markets, and there could be increasing usage of the overnight reverse repurchase agreement (ON RRP) facility.In light of the potential for expanded use of the ON RRP facility, the staff had conducted a review to ensure that the terms of the facility and its counterparty base were well positioned to continue to support effective policy implementation. By offering a broad range of money market lenders an outside investment option, the ON RRP facility enhances lenders' bargaining power in negotiating rates on short-term private investments and thus helps establish a floor on overnight money market rates. The facility can also alleviate downward pressure on overnight rates associated with reserve growth by broadening the range of liabilities that support the Federal Reserve's balance sheet expansion. The review recommended raising the ON RRP per-counterparty limit from $30 billion to $80 billion. The $30 billion limit had been established a number of years ago, and the amount of credit intermediated through money markets had grown substantially since then. The increase in the limit to $80 billion would restore the capacity of the facility relative to the aggregate size of money fund counterparties to roughly the level in place when the facility was established. The staff would also monitor money market conditions on an ongoing basis to assess whether any additional adjustments were needed to the ON RRP facility terms.In addition to changes to the ON RRP parameters, the deputy manager also noted that the Federal Reserve could consider adjusting its administered rates if undue downward pressure on overnight rates emerged. Responses to the Desk surveys indicated that many market participants anticipated adjustments to the interest on excess reserves rate and the ON RRP rate at or before the June meeting. Finally, in light of more normal conditions in agency commercial mortgage-backed securities (CMBS) markets, the Desk planned to conduct agency CMBS operations as needed to sustain smooth market functioning but would cease regularly scheduled CMBS operations.In their discussion following the Desk briefings, participants noted that the ON RRP facility had been very effective in establishing a firm floor for the federal funds rate and supporting monetary policy implementation. Participants commented that the facility would continue to be an important part of the monetary policy implementation framework going forward, particularly in coming months with reserve levels projected to rise rapidly. Participants broadly supported the proposed increase in the counterparty limit, and a few participants also noted that they would support removing the limit altogether. A few participants suggested that some type of dynamic or differential limit could be considered in the future to enable the ON RRP facility to adapt more readily to market developments. A few participants noted that the concerns at the time the facility was established about possible adverse effects of the ON RRP facility on financial stability and the structure of money markets had not materialized. Indeed, over the spring of 2020, the facility played an important role in helping stabilize money market conditions. In light of the potential for greater use of the ON RRP facility going forward in connection with the expansion of the Federal Reserve's balance sheet and associated downward pressure on overnight rates, a couple of participants noted that it might be useful to review lessons learned regarding the ON RRP facility since its inception.Following the discussion, the Chair noted the potential for downward pressure on money market rates and suggested that, should undue downward pressure on overnight rates emerge, it might be appropriate to implement adjustments to administered rates at upcoming meetings or even between meetings to support effective policy implementation and ensure that the federal funds rate remains well within the target range.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The COVID‑19 pandemic and the measures undertaken to contain its spread continued to affect economic activity in the United States and abroad. The information available at the time of the March 16–17 meeting suggested that U.S. real gross domestic product (GDP) was expanding in the first quarter of 2021 at a pace that was faster than in the fourth quarter of last year, although the level of real GDP had likely not yet returned to the level seen before the onset of the pandemic. Labor market conditions improved in January and February, but employment was still well below its level at the start of 2020. Consumer price inflation through January—as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE)—remained well below 2 percent.Total nonfarm payroll employment increased solidly over January and February after softening at the end of last year. As of February, payroll employment had retraced somewhat more than half of the losses seen since the onset of the pandemic. The unemployment rate fell to 6.2 percent in February. The unemployment rates for Hispanics and Asians declined, on balance, over January and February, while the unemployment rate for African Americans was unchanged on net; the rates for both African Americans and Hispanics remained well above the national average. Even though the labor force participation rate edged down, the employment-to-population ratio moved up somewhat over January and February; both measures remained below their pre-pandemic levels. Initial claims for unemployment insurance in early March were at their lowest level since November of last year. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP indicated that the four-week average increase in private employment at the end of February was about the same as it had been in the middle of the month, when the Bureau of Labor Statistics collects payroll employment data.Average hourly earnings for all employees rose 5.3 percent over the 12 months ending in February, and labor compensation per hour in the business sector increased 6.6 percent over the four quarters of 2020. The gains in both these measures, however, continued to be dominated by changes in the composition of the workforce. In particular, the concentration of job losses among lower-wage workers since early last year had resulted in outsized increases in average hourly earnings and compensation per hour that were not indicative of tight labor market conditions. By contrast, the employment cost index of total hourly compensation in the private sector rose 2.6 percent over the 12 months of last year, and a staff estimate of the 12‑month change in the median wage derived from the ADP data was 3.2 percent in January. These measures are likely to have been less affected by changes in workforce composition, and they were rising more slowly than their pre-pandemic pace.Total PCE price inflation was 1.5 percent over the 12 months ending in January and continued to be held down by slack in resource utilization. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, also was 1.5 percent over the 12 months ending in January, while the trimmed mean measure of 12‑month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.7 percent in January. In February, the 12‑month change in the consumer price index (CPI) was 1.7 percent, while core CPI inflation was 1.3 percent over the same period. The latest readings on survey-based measures of longer-run inflation expectations were little changed on balance. In early March, the University of Michigan Surveys of Consumers preliminary measure for the next 5 to 10 years was the same as in the previous two months, while in February, the 3‑year‑ahead measure of inflation expectations produced by the Federal Reserve Bank of New York was essentially unchanged from its January level. The Survey of Professional Forecasters measure of PCE price inflation over the next 10 years edged up in the first quarter, returning to its pre-pandemic level. A staff index of common inflation expectations, which summarizes the co‑movement of a wide variety of inflation expectations measures, was at about the same level in the fourth quarter of last year as in the third quarter.Consumer spending appeared to be increasing in the first quarter at a pace considerably faster, on balance, than in the fourth quarter of last year. Real PCE expanded strongly in January after declining over the preceding two months, with spending likely boosted by federal stimulus payments sent out in early January. The components of the nominal retail sales data used by the Bureau of Economic Analysis to estimate PCE pointed to a step-down in spending in February, but revised data for the previous month suggested an even stronger gain in January. Spending in March was expected to be boosted by additional federal stimulus payments from the ARP, which started to be distributed around the middle of the month. In addition, the personal saving rate jumped to an even higher level in January, and ongoing gains in labor earnings along with further fiscal support pointed to additional increases in accumulated household savings. Moreover, the preliminary reading of consumer sentiment from the Michigan survey moved up notably in early March to its highest level over the past year, reportedly reflecting the growing number of vaccinations and the enactment of the ARP, although consumer sentiment remained below its levels from just before the onset of the pandemic.Construction of single-family homes and home sales remained well above their pre-pandemic levels. However, the incoming data for this sector were mixed. Starts of single-family homes moved down notably over January and February, in part likely reflecting severe winter weather in February. Starts of multifamily units also fell in February but by less than the strong increase seen in January. Construction permits for single-family homes moved down, on net, over January and February, pointing to some slowing in construction in coming months. Sales of both new and existing homes increased further in January, and home prices continued to rise briskly.Business investment in equipment and intangibles was continuing to increase in the first quarter after rising appreciably in the fourth quarter of last year. Nominal shipments of nondefense capital goods excluding aircraft expanded strongly in January, and rising orders for these goods pointed to further gains in business equipment spending in coming months. Business investment in the drilling and mining sector appeared to be increasing further after turning up sharply in the fourth quarter, as crude oil and natural gas rigs in operation—an indicator of drilling investment—continued to rise through early March with oil prices moving higher. Nominal nonresidential construction spending rose somewhat in January, but investment in nonresidential structures outside of the drilling and mining sector looked to remain weak in the current quarter after declining further in the fourth quarter, reflecting continued hesitation by businesses to commit to building projects with lengthy times to completion and uncertain future returns.Industrial production continued to rise solidly in January but then fell markedly in February, largely reflecting declines in manufacturing and mining sector output caused by severe winter weather in the south central region of the country in the middle of that month. Along with the severe weather, a cutback in the production of motor vehicles and parts also reflected a global shortage of semiconductors. New orders indexes in national and regional manufacturing surveys pointed toward solid increases in factory output in the coming months, although reports of shortages in materials and labor, as well as bottlenecks in transportation, signaled some potential restraints on the pace of the manufacturing recovery.Total real government purchases appeared to be rising in the first quarter after edging down in the fourth quarter. Although data through February indicated that defense spending was moving down, a likely bounceback in nondefense spending was expected to lift total federal purchases. State and local government purchases looked to be increasing, as the payrolls of these governments expanded, on net, over January and February, and nominal state and local construction spending increased solidly in January. Moreover, additional federal support for state and local governments included in the ARP, along with an improved outlook for state and local tax revenues, pointed to further notable increases in state and local purchases.Data for December and January showed a narrower nominal U.S. international trade deficit than in November. Both imports and exports continued to rebound from their collapse in the first half of last year. Goods imports in January were much higher than a year earlier, with continued gains in most categories. Nominal goods exports in January nearly recovered to their level from a year earlier, with particular strength in exports of capital goods and industrial supplies. Services imports and exports remained depressed, weighed down by the continued suspension of most international travel.Recent data pointed to a slowdown in economic activity across foreign economies around the turn of the year, as tight social-distancing restrictions were imposed to rein in a new wave of COVID-19 infections in various parts of the world, most notably in Europe and Latin America. Even so, economies appeared to be better adapted to operating under restrictions than during previous waves of infections. Manufacturing activity continued to generally outperform activity in the services sector, and manufactured exports from China and some other Asian economies remained strong, especially to the United States. Inflation rebounded in many foreign economies, reflecting rising energy prices and other temporary factors. However, underlying inflationary pressures remained subdued.Staff Review of the Financial Situation Investors appeared to have become more optimistic about the economic outlook over the intermeeting period against the backdrop of progress on COVID-19 vaccinations, signs of stronger domestic spending, and additional fiscal stimulus. The nominal Treasury yield curve steepened markedly, largely because of increases in longer-term real yields, although measures of inflation compensation also increased further. Despite the spikes in equity market volatility early in the intermeeting period, spurred by heavy trading concentrated in a few specific stocks and subsequent concerns over the rapid rise in longer-term interest rates, broad equity price indexes rose on net. Consistent with the stronger outlook, spreads on high-yield corporate bonds narrowed. Financing conditions for businesses with access to capital markets and households with high credit scores remained broadly accommodative, but conditions stayed tight for other borrowers.The Treasury yield curve steepened over the intermeeting period, with 5- and 10-year yields rising markedly. Measures of inflation compensation increased moderately, on net, continuing the trend observed over recent months. However, in contrast to recent months, most of the recent increase in longer-term Treasury yields was accounted for by higher TIPS-implied real yields. Market participants attributed the increases in longer-term yields in part to increased investor optimism about the economic outlook and expectations of higher Treasury debt issuance. On February 25, yields rose especially sharply. Market depth became thin, and bid-ask spreads widened, but Treasury market liquidity gradually recovered over the following days. Swaption-implied volatilities of longer-term interest rates rose notably.The expected path for the federal funds rate over the next few years, as implied by a straight read of overnight index swap quotes, rose substantially since the previous FOMC meeting and moved above 25 basis points in the first quarter of 2023, about three quarters sooner than expected at the time of the January meeting.Broad stock price indexes increased, on net, over the intermeeting period, consistent with increased investor optimism about the economic outlook and the enactment of the ARP. Stocks in cyclically sensitive industries such as energy, banking, and small caps recorded sizable gains, while other sectors experienced mixed performance. One-month option-implied volatility on the S&P 500—the VIX—fluctuated over a wide range during the intermeeting period but moved lower on balance. Spreads of corporate bond yields over comparable-maturity Treasury yields were roughly unchanged on investment-grade corporate bonds but narrowed for speculative-grade bonds.Conditions in short-term funding markets remained stable over the intermeeting period. Spreads on commercial paper and negotiable certificates of deposit across different tenors were little changed and remained near historically low levels. Assets under management (AUM) of government money market funds (MMFs) rose over the intermeeting period, whereas AUM of prime MMFs declined somewhat.The effective federal funds rate and the Secured Overnight Financing Rate averaged 7 basis points and 3 basis points, respectively, over the intermeeting period, decreasing somewhat relative to the previous intermeeting period average amid a net decrease in Treasury bill issuance and rising reserves. There continued to be no participation in the Federal Reserve's repo operations, but participation in the Federal Reserve's ON RRP increased a little. Amid stable market conditions, there was no take-up in the Money Market Mutual Fund Liquidity Facility or the Commercial Paper Funding Facility.Improved U.S. economic growth prospects and optimism about the eventual lifting of social-distancing and related restrictions globally were major drivers of asset prices abroad, spurring sizable increases in sovereign yields in advanced foreign economies. In response to rising yields, the Reserve Bank of Australia increased its bond purchases, and the European Central Bank indicated it would increase the pace of its bond purchases going forward. The broad dollar index rose modestly, with more notable appreciation against currencies of emerging market economies (EMEs). EME sovereign spreads edged up, and flows into EME bond funds fell back later in the period amid the rise in yields in advanced economies. However, flows into dedicated EME equity funds remained strong. Overall, foreign equity indexes increased slightly in most major markets.Financing conditions for nonfinancial businesses in capital markets remained broadly accommodative over the intermeeting period, supported by low interest rates and high equity valuations. Gross and net corporate bond issuances were solid in January and February. Gross issuance of leveraged loans was strong in January, driven mainly by refinancing activity, as primary-market spreads compressed notably since the end of last year in response to strong investor demand for such loans. Equity raised through traditional initial public offerings and seasoned equity offerings continued to be strong in January and February, and initial equity offerings by special purpose acquisition companies remained exceptionally high. Commercial and industrial loans outstanding on banks' balance sheets continued to decline through February as loan paydowns persisted and demand for new bank credit reportedly remained subdued.Corporate earnings continued to recover while the credit quality of nonfinancial corporations improved further. Corporate bond defaults declined in December and January and reached levels substantially below their 2019 average. In addition, the volume of nonfinancial corporate credit rating upgrades modestly outpaced downgrades over the first two months of 2021. Market indicators of future default expectations moved lower.Financing conditions for small businesses remained tight. Demand for loans remained depressed—and loan originations fell in December last year to about the same level seen in August—after the spike in lending associated with the first round of the Paycheck Protection Program. Long-term delinquencies remained elevated relative to recent years but were at levels significantly below those experienced during the Global Financial Crisis. Municipal market financing conditions stayed accommodative over the intermeeting period.For commercial real estate (CRE) financed through capital markets, financing conditions remained accommodative over the intermeeting period. Agency CMBS spreads narrowed further with strong issuance in December and January. Spreads on non-agency CMBS also tightened, although triple-B spreads stayed at elevated levels compared with pre-pandemic levels. Issuance of non-agency CMBS remained weak relative to pre-pandemic levels. CRE loan growth at banks was weak, on net, through February, consistent with tight bank lending standards.Financing conditions in the residential mortgage market tightened somewhat over the intermeeting period but remained accommodative for stronger borrowers. Mortgage rates for most borrowers increased but stayed near historically low levels, supporting elevated refinance and purchase activity through January. Credit was broadly available to higher-score borrowers meeting standard conforming loan criteria but tightened further for borrowers with lower credit scores. The share of mortgages in forbearance was unchanged.Financing conditions in consumer credit markets remained generally accommodative for borrowers with strong credit scores but were still tight for those with nonprime scores. Auto loan balances continued to grow in January, while credit card balances declined. Interest rates on new credit card offers to borrowers with prime credit scores continued to trend down, on net, through December. In contrast, offer rates to nonprime borrowers rose further. Conditions in the asset-backed securities market were stable during the intermeeting period.Staff Economic Outlook The U.S. economic projection prepared by the staff for the March FOMC meeting was considerably stronger than the January forecast. Real GDP growth appeared to be picking up at the beginning of this year by more than the staff had expected, likely reflecting both a faster-than-anticipated easing in social distancing and a more rapid response by households to the fiscal support package enacted in late December. Moreover, the size of the ARP enacted in March was considerably larger than what the staff had assumed in the January projection. All told, real GDP growth was projected to be substantial this year and the unemployment rate was forecast to decline markedly, as the staff's projection also continued to anticipate that widespread vaccination would allow for further easing in social distancing this year. Real GDP growth was expected to step down in 2022 and 2023 but still outpace that of potential over this period, leading to a decline in the unemployment rate to historically low levels, as monetary policy was assumed to remain highly accommodative.Incoming data on inflation were a little above what the staff had expected. The 12‑month changes in total and core PCE prices were expected to transitorily move above 2 percent in coming months, as the low inflation readings from the spring of last year dropped out of the calculation window. In addition, inflation was forecast to be temporarily boosted this year by the expected emergence of some production bottlenecks and supply constraints. Following the transitory increase this year, inflation was projected to run a bit below 2 percent next year and then to reach 2 percent by 2023, reflecting tight resource utilization in product and labor markets.The staff continued to see the uncertainty surrounding the outlook as elevated. Moreover, the uncertain course of the pandemic, particularly the emergence of more-contagious strains of the coronavirus in the United States and elsewhere, was still viewed as tilting the risks to the economic outlook to the downside. However, given the resilience of the economy in the face of the earlier surge in new COVID-19 cases, hospitalizations, and deaths and the magnitude of fiscal support enacted, the downside risks to the economic outlook were seen as smaller than for the previous projection. The staff viewed the risks of upside inflationary pressures as having increased since the previous forecast and now saw the risks to the inflation projection as balanced.Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2021 through 2023 and over the longer run, based on their individual assessments of appropriate monetary policy, including the path of the federal funds rate. The longer-run projections represented each participant's assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. A Summary of Economic Projections was released to the public following the conclusion of the meeting.In their discussion of current conditions, participants noted that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment had turned up recently, although the sectors most adversely affected by the pandemic remained weak. Inflation continued to run below 2 percent. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Participants noted that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis would continue to weigh on economic activity, employment, and inflation and posed considerable risks to the economic outlook.Participants observed that the pace of the economic recovery had picked up recently and that the economy continued to show resilience in the face of the pandemic. They noted encouraging developments regarding the pandemic, including significant declines in the number of new cases, hospitalizations, and deaths over the intermeeting period as well as a pickup in the pace of vaccinations. In light of these developments as well as the extent of the recent fiscal policy support, participants significantly revised up their projections for real GDP growth this year compared with the projections they submitted last December. They noted, however, that economic activity and employment were currently well below levels consistent with maximum employment.Participants observed that the economic downturn had not fallen equally on all Americans and that lower-income and Black and Hispanic households had been disproportionately affected by the pandemic. A number of participants stressed that recently enacted fiscal support would help address some of the hardships faced by these groups and that monetary policy would also help by promoting the economy's return to the Committee's goals of broad-based and inclusive maximum employment and price stability.Participants observed that household spending had risen notably so far this year and anticipated that further gains in consumer spending would contribute significantly to the economic recovery. While household spending on services that typically require close personal contact remained weak, participants expected spending on these services would improve as vaccinations became more widespread, social-distancing measures were relaxed, and the public became less wary of close personal interactions. Participants anticipated consumer spending would be bolstered by the recently enacted fiscal stimulus packages as well as by accommodative monetary policy. Many participants also pointed to the elevated level of household savings and judged that the release of pent-up demand could boost consumption growth further as social distancing waned. Participants also observed that residential construction continued to be solid and home sales remained robust in part because of low interest rates. Low inventory was viewed as an important factor supporting strong gains in housing prices.With respect to the business sector, participants observed that business equipment investment had continued to increase and that readings on new orders and shipments of capital goods remained strong. While some District contacts continued to report that firms in industries such as CRE or leisure, travel, and hospitality were struggling from pandemic-related social distancing, other District contacts reported that activity in these industries had started to improve. Participants noted that surveys of business activity had picked up recently and that many District contacts were growing increasingly optimistic about business prospects given ongoing progress on vaccinations. Participants also discussed reports of shortages in materials, key intermediate inputs, and labor as well as bottlenecks in shipping. A few participants noted that higher crop prices were continuing to boost income in the agricultural sector. Several participants judged that the support provided by the ARP could improve the financial positions of small firms that had been adversely affected by the pandemic.Participants observed that labor market conditions had improved recently, as payroll employment registered strong gains in February and the unemployment rate fell to 6.2 percent. Even so, payroll employment was about 9.5 million jobs below its pre-pandemic level, and labor market conditions for those in the most disadvantaged communities were viewed as lagging behind those of other households. Moreover, participants noted that employment in the leisure and hospitality sector was still down substantially from its pre-pandemic level despite a sharp rebound in February. Participants generally expected strong job gains to continue over coming months and into the medium term, supported by accommodative fiscal and monetary policies as well as by continued progress on vaccinations, further reopening of sectors most affected by the pandemic, and the associated recovery in economic activity. However, participants noted that the economy was far from achieving the Committee's broad-based and inclusive goal of maximum employment. Some participants commented that labor force participation continued to be held down by workers' health concerns and additional childcare responsibilities associated with virtual schooling and that the pace of recovery in the labor market would depend importantly on how rapidly those affected by these issues could rejoin the labor force. Several participants noted that the speed of the labor market recovery also depended on factors such as the movement of workers across industries and occupations in a restructuring economy or the effects of technological change on the demand for labor. Several participants suggested that the ARP could hasten the recovery, which could help limit longer-term damage in labor markets caused by the pandemic.Participants observed that headline PCE inflation continued to run below 2 percent. In the near term, the 12-month change in PCE prices was expected to move above 2 percent as the low inflation readings from the spring of last year drop out of the calculation. Most participants also pointed to supply constraints that could contribute to price increases for some goods in coming months as the economy continued to reopen. After the transitory effects of these factors fade, however, participants generally anticipated that annual inflation readings would edge down next year. Subsequently, participants expected that inflation would likely move along a trajectory consistent with achieving the Committee's objectives over time, supported by strong aggregate demand, which participants expected would be driven in part by accommodative monetary and fiscal policies.Participants discussed market- and survey-based measures of longer-term inflation expectations and their implications for the inflation outlook. Market-based measures of inflation compensation at the 5- and 10-year horizons had continued to move up over the intermeeting period, while survey-based measures of inflation expectations were little changed on balance. A number of participants indicated that the increases in market-based measures of inflation compensation from the very low levels of last spring were consistent with the view that inflation was likely to move along a path over time consistent with the Committee's goals.Participants noted that overall financial conditions remained highly accommodative, in part reflecting the stance of monetary policy. Participants commented on the notable rise in longer-term Treasury yields that occurred over the intermeeting period and generally viewed it as reflecting the improved economic outlook, some firming in inflation expectations, and expectations for increased Treasury debt issuance. Disorderly conditions in Treasury markets or a persistent rise in yields that could jeopardize progress toward the Committee's goals were seen as cause for concern. While overall financial conditions were still seen as accommodative, a number of participants remarked that financing conditions remained challenging for many small businesses. A couple of participants expressed concern that highly accommodative financial conditions could lead to excessive risk-taking and the buildup of financial imbalances.While generally acknowledging that the medium-term outlook for real GDP growth and employment had improved, participants continued to see the uncertainty surrounding that outlook as elevated. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. Most participants indicated that the pandemic continued to pose considerable risks to the economic outlook, including risks associated with new more-contagious virus strains, obstacles in getting sufficient numbers of the public vaccinated, or social-distancing fatigue. A few participants pointed to risks associated with stress in the CRE sector or to risks associated with the unwinding of mortgage forbearance and eviction moratoriums provided to households. With regard to upside risks, some participants pointed to the possibility that fiscal policy could have a more expansionary effect than anticipated, that households could display a greater-than-expected willingness to spend out of accumulated savings, or that widespread vaccinations and easing of social distancing could result in a more rapid boost to spending and employment than anticipated.Most participants noted that they viewed the risks to the outlook for inflation as broadly balanced. Several remarked that supply disruptions and strong demand could push up price inflation more than anticipated. Several participants commented that the factors that had contributed to low inflation during the previous expansion could again exert more downward pressure on inflation than expected.In their consideration of the stance of monetary policy, participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time, thereby promoting the Committee's statutory goals of maximum employment and price stability. Participants noted that indicators of economic activity and employment had turned up recently after a period of moderation, although the sectors most adversely affected by the pandemic remained weak. Despite these positive indicators and an improved public health situation, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook. Consequently, participants judged that the current stance of policy and policy guidance remained appropriate to foster further economic recovery as well as to achieve inflation that averages 2 percent over time and longer-term inflation expectations that remain well anchored at 2 percent.Participants judged that the Committee's current guidance for the federal funds rate and asset purchases was serving the economy well. They noted that a benefit of the outcome-based guidance was that it did not need to be recalibrated often in response to incoming data or the evolving outlook. Participants also noted the importance of communicating to the public that the existing guidance, together with the new monetary policy framework as delineated in the revised Statement on Longer-Run Goals and Monetary Policy Strategy, meant that the path of the federal funds rate and the balance sheet depend on actual progress toward reaching the Committee's maximum-employment and inflation goals. In particular, various participants noted that changes in the path of policy should be based primarily on observed outcomes rather than forecasts.Participants agreed that overall financial conditions were accommodative. They noted that the Federal Reserve's asset purchases since last March had materially eased financial conditions and were providing substantial support to the economy. Participants noted that it would likely be some time until substantial further progress toward the Committee's maximum-employment and price-stability goals would be realized and that, consistent with the Committee's outcome-based guidance, asset purchases would continue at least at the current pace until then. A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. They noted that following a moderation in the pace of the recovery, indicators of economic activity and employment had turned up recently, although the sectors most adversely affected by the pandemic remained weak. Inflation continued to run below 2 percent. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Members also remarked that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. In addition, members agreed that the ongoing public health crisis continued to weigh on economic activity, employment, and inflation and was posing considerable risks to the economic outlook.Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals. All members reaffirmed that, in accordance with the Committee's goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run and with inflation running persistently below this longer-run goal, they would aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. Members expected to maintain an accommodative stance of monetary policy until those outcomes were achieved.All members agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent, and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time. In addition, members agreed that it would be appropriate for the Federal Reserve to continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made toward the Committee's maximum-employment and price-stability goals. They judged that these asset purchases would help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook and that they would be prepared to adjust the stance of monetary policy as appropriate in the event that risks emerged that could impede the attainment of the Committee's goals. Members also agreed that, in assessing the appropriate stance of monetary policy, they would take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.With regard to the postmeeting statement, in light of the notably positive tone of recent data, members judged that it was appropriate to incorporate that development in the description of the economic situation with the language that "indicators of economic activity and employment have turned up recently." Members also determined that, with oil prices having essentially retraced their pandemic-related declines, it was appropriate to remove the reference to oil prices as a factor holding down consumer price inflation and to simply state that "inflation continues to run below 2 percent." Regarding the directive to the Desk, members agreed that the directive should incorporate the proposed increase in the per-counterparty limit for the ON RRP facility to $80 billion.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective March 18, 2021, the Federal Open Market Committee directs the Desk to:The vote also encompassed approval of the statement below for release at 2:00 p.m.:"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak. Inflation continues to run below 2 percent. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective March 18, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, April 27–28, 2021. The meeting adjourned at 10:20 a.m. on March 17, 2021.Notation Vote By notation vote completed on February 16, 2021, the Committee unanimously approved the minutes of the Committee meeting held on January 26–27, 2021. _______________________ James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended through the discussion of developments in financial markets and open market operations. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2021 03 17Consumer Resources April 27–28, 2021A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, April 27, 2021, at 9:30 a.m. and continued on Wednesday, April 28, 2021, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Raphael W. Bostic Michelle W. Bowman Lael Brainard Richard H. Clarida Mary C. Daly Charles L. Evans Randal K. Quarles Christopher J. WallerJames Bullard, Esther L. George, Naureen Hassan, Loretta J. Mester, and Eric Rosengren, Alternate Members of the Federal Open Market CommitteePatrick Harker, Robert S. Kaplan, and Neel Kashkari, Presidents of the Federal Reserve Banks of Philadelphia, Dallas, and Minneapolis, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistDavid Altig, Kartik B. Athreya, Brian M. Doyle, Rochelle M. Edge, Eric M. Engen, Anna Paulson, and William Wascher, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountPatricia Zobel, Deputy Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsMatthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsSally Davies, Deputy Director, Division of International Finance, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Division of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Division of Board Members, Board of GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis, and Chiara Scotti, Special Advisers to the Board, Division of Board Members, Board of GovernorsCarol C. Bertaut, Senior Associate Director, Division of International Finance, Board of Governors; David Bowman, Senior Associate Director, Division of Monetary Affairs, Board of Governors; Diana Hancock, Senior Associate Director, Division of Research and Statistics, Board of Governors; Elizabeth Klee, Senior Associate Director, Division of Financial Stability, Board of GovernorsBrett Berger,2 Senior Adviser, Division of International Finance, Board of Governors; Ellen E. Meade, Senior Adviser, Division of Monetary Affairs, Board of Governors; Jeremy B. Rudd, Senior Adviser, Division of Research and Statistics, Board of GovernorsMarnie Gillis DeBoer and Min Wei, Associate Directors, Division of Monetary Affairs, Board of Governors; Glenn Follette, Associate Director, Division of Research and Statistics, Board of GovernorsRicardo Correa2 and Stephanie E. Curcuru,2 Deputy Associate Director, Division of International Finance, Board of Governors; Eric C. Engstrom, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsJennifer Gallagher, Special Assistant to the Board, Division of Board Members, Board of GovernorsBrian J. Bonis, Michiel De Pooter,2 Giovanni Favara, Laura Lipscomb,2 and Zeynep Senyuz, Assistant Directors, Division of Monetary Affairs, Board of Governors; Byron Lutz and Matthias Paustian, Assistant Directors, Division of Research and Statistics, Board of GovernorsPenelope A. Beattie,2 Section Chief, Office of the Secretary, Board of GovernorsMark A. Carlson,2 Senior Economic Project Manager, Division of Monetary Affairs, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Jonathan E. Goldberg, Edward Herbst, and Krista Schwarz, Principal Economists, Division of Monetary Affairs, Board of GovernorsRandall A. Williams, Lead Information Manager, Division of Monetary Affairs, Board of GovernorsCourtney Demartini,2 Lead Financial Institution Policy Analyst, Division of Monetary Affairs, Board of GovernorsAnthony Sarver,2 Senior Financial Institution Policy Analyst, Division of Monetary Affairs, Board of GovernorsKenneth C. Montgomery, First Vice President, Federal Reserve Bank of BostonMichael Dotsey, Joseph W. Gruber, and Ellis W. Tallman, Executive Vice Presidents, Federal Reserve Banks of Philadelphia, Kansas City, and Cleveland, respectivelyAnne Baum, Carlos Garriga, Samuel Schulhofer-Wohl,2 Mark L.J. Wright, and Nathaniel Wuerffel,2 Senior Vice Presidents, Federal Reserve Banks of New York, St. Louis, Chicago, Minneapolis, and New York, respectivelyMatthew Nemeth,2 Pia Orrenius, Nicolas Petrosky-Nadeau, and Matthew D. Raskin,2 Vice Presidents, Federal Reserve Bank of New York, Dallas, San Francisco, and New York, respectivelyRobert Lerman2 and William E. Riordan,2 Assistant Vice Presidents, Federal Reserve Banks of New York and New York, respectivelyMark Choi2 and Ellen Correia-Golay,2 Markets Officers, Federal Reserve Banks of New York and New York, respectivelyFatih Karahan and Jenny Tang, Senior Economists, Federal Reserve Banks of New York and Boston, respectivelyDevelopments in Financial Markets and Open Market Operations The System Open Market Account (SOMA) manager first discussed developments in financial markets over the intermeeting period. Financial conditions eased modestly as market participants continued to focus on progress toward economic reopening as well as supportive monetary and fiscal policy. Equity prices rose, with the S&P 500 index reaching a record high, while Treasury yields, the dollar, and credit spreads declined modestly. The equity gains were broad based across sectors, though shares of small caps, as captured by the Russell 2000 index, declined. News regarding losses associated with a highly levered family investment office affected the equity prices of some large financial firms, but the broader financial market effects appeared limited.After rising sharply in recent months, longer-term Treasury yields declined modestly over the intermeeting period, even as market expectations for U.S. growth continued to be revised higher. Contacts reported that the earlier increases in yields drew in a range of investors, including foreign institutions, pension funds, and insurance companies. Against this backdrop, term premiums as measured by term structure models and based on estimates using the Open Market Desk's surveys of primary dealers and market participants moved slightly lower. Nonetheless, market participants were attentive to the potential for rising yields going forward, and, in recent months, Desk survey respondents had increased the probability they attach to higher yields at the end of 2021.Regarding expectations for the policy outlook, the market- and survey-implied paths of the federal funds rate were both relatively little changed over the intermeeting period, and the modal survey path in later years continued to imply that the target range would gradually increase to a level just over 2 percent in 2026. Expectations for the path of asset purchases were also stable, and market participants remained focused on the Committee's communications about progress toward its goals. According to the median survey responses, the Federal Reserve's net purchases of Treasury and agency securities were expected to end three quarters after the first reduction in the pace of asset purchases, and the first increase in the target range for the federal funds rate was expected to occur three quarters after that.Recent financial market developments across advanced economies reflected differing expectations for economic growth and monetary policy. Some countries that were expected to recoup COVID-19-related output losses earlier than others had seen larger yield increases and more appreciation in their currencies in recent months. Over the intermeeting period, the Bank of Canada announced a reduction in the pace of its asset purchases and brought forward its forecast of when conditions would be met for an increase in its policy rate.The manager turned next to money markets and the Federal Reserve's balance sheet. Reserve balances increased further this intermeeting period to a record level of $3.9 trillion. The effective federal funds rate was steady at 7 basis points. However, amid ongoing strong demand for safe short-term investments and reduced Treasury bill supply, the Secured Overnight Financing Rate (SOFR) stood at 1 basis point throughout the period. The overnight reverse repurchase agreement (ON RRP) facility continued to effectively support policy implementation, and take-up peaked at more than $100 billion. A modest amount of trading in overnight repurchase agreement (repo) markets occurred at negative rates, although this development appeared to largely reflect technical factors. The SOMA manager noted that downward pressure on overnight rates in coming months could result in conditions that warrant consideration of a modest adjustment to administered rates and could ultimately lead to a greater share of Federal Reserve balance sheet expansion being channeled into ON RRP and other Federal Reserve liabilities. Although few survey respondents expected an adjustment to administered rates at the current meeting, more than half expected an adjustment by the end of the June FOMC meeting.The manager concluded with an update on three operational issues. Following the review of the ON RRP facility discussed at the previous meeting, the Desk planned to relax counterparty eligibility criteria for money funds and government-sponsored enterprises in order to allow smaller counterparties of these types to participate. The Desk also planned to make modest adjustments to the allocation of Treasury outright purchases across maturity ranges to ensure that purchases remain roughly proportional to the outstanding amounts of Treasury securities. These minor technical adjustments would have no implications for the effects of the Federal Reserve's asset purchases on overall financial conditions. Finally, the manager requested that the Committee vote to maintain the standing U.S. dollar and foreign currency liquidity swap arrangements and to renew the reciprocal currency arrangements with Canada and Mexico under the North American Framework Agreement.The Committee voted unanimously to renew the reciprocal currency arrangements with the Bank of Canada and the Bank of Mexico; these arrangements are associated with the Federal Reserve's participation in the North American Framework Agreement of 1994. In addition, the Committee voted unanimously to renew the dollar and foreign currency liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. The votes to renew the Federal Reserve's participation in these standing arrangements occur annually at the April or May FOMC meeting.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.Discussion of Repurchase Agreement Arrangements The staff briefed participants on the Federal Reserve's experience with the daily repo operations with primary dealers that have been in place since September 2019 and the temporary Foreign and International Monetary Authorities (FIMA) Repo Facility established in March last year. The briefing also reviewed considerations that could be relevant for policymakers' judgments regarding whether these arrangements should become permanent standing facilities. The staff noted that repo operations have been a useful tool in controlling the federal funds rate by adding reserves to ensure that they remain ample and by limiting pressures in repo markets that could spill over into unsecured markets. In March 2020, repo operations worked in concert with other measures to manage shocks to financial markets by stabilizing Treasury market conditions. Since June 2020, when the rate on overnight repo operations was raised relative to the rate of interest on excess reserves, repo operations have served as a backstop and there has been no substantive usage. Regarding considerations concerning a permanent standing repo facility, the briefing noted that standing repo operations could be viewed as useful in forestalling funding strains that could spill over into other overnight markets and limit dealers' intermediation activity in financial markets. However, a standing repo facility could be seen as a form of liquidity support for nonbank financial institutions, and one that could create incentives for firms with access to the facility to take on more liquidity risk against eligible securities than would otherwise be the case. In discussing considerations for the establishment of a standing FIMA repo facility, the staff noted that such a facility could limit the propensity for foreign official institutions to execute large sales of U.S. Treasury securities in a stress environment that, in turn, could exacerbate strains in broader U.S. domestic financial markets. The briefing also noted some potential drawbacks of such a facility, including less transparency regarding its operations relative to other Federal Reserve facilities.In their discussion of considerations related to the establishment of a standing repo facility as part of the Committee's overall approach to policy implementations in an ample reserves regime, a substantial majority of participants saw the potential benefits of an appropriately calibrated facility as outweighing the potential costs. Nearly all participants commented that a standing repo facility, by acting as a backstop, could help address pressures in the markets for U.S. Treasury securities and Treasury repo that could spill over to other funding markets and impair the implementation and transmission of monetary policy. In this regard, a number of participants noted the potential for pressures in short-term funding markets to arise from time to time, even with monetary policy operating in an ample-reserves regime. Many participants noted that a standing facility could provide a timely and automatic response to incipient market pressures; they remarked that such pressures can be difficult to anticipate and, as a result, might not be as promptly addressed with discretionary operations. A few participants noted that a standing repo facility could provide counterparties with additional flexibility in managing the composition of their holdings of high-quality liquid assets, potentially reducing the demand for reserves. A few participants cautioned that establishing a standing repo facility should not be viewed as a way of implementing monetary policy without an ample supply of reserves. A couple of participants remarked that most of the benefits of a standing repo facility could be realized by the Federal Reserve maintaining readiness to conduct repo operations on short notice as needed, noting that such an arrangement could avoid some of the costs of a standing facility. A few participants mentioned that a standing repo facility could be perceived as a means of supporting the financing of the U.S. Treasury or as a permanent Federal Reserve liquidity backstop for nondepository institutions; a couple of others called out the risk that such a facility could crowd out private market sources of liquidity provision.Participants noted that it would be important to carefully consider key design elements of a potential standing repo facility, including the pricing structure, counterparties, and range of collateral accepted. A number of participants commented that the counterparties at such a facility should include depository institutions. Several participants noted the facility's design should be targeted specifically to enhance control of the federal funds rate rather than to limit volatility in the repo market.In their discussion of considerations related to the establishment of a permanent FIMA repo facility, a vast majority of participants saw the potential benefits as outweighing the costs. Participants highlighted a number of benefits of a standing FIMA repo facility, with many noting that it could support smoother functioning in U.S. Treasury securities markets and U.S. financial markets more broadly by providing foreign official holders of U.S. Treasury securities with an alternative to outright sales of these securities in times of market stress. A few participants noted that, had a FIMA repo facility been in place in March 2020, it likely would have significantly damped pressures in these markets caused by the abrupt need for dollar funding abroad. Several participants suggested that a standing FIMA repo facility could be viewed as complementing the existing dollar swap lines by extending access to dollar funding for a broader range of central banks and foreign official institutions. Participants also commented on some potential risks of a standing FIMA repo facility, including less transparency in connection with FIMA repo operations relative to other Federal Reserve facilities.Staff Review of the Economic Situation The COVID-19 pandemic and the measures undertaken to contain its spread continued to affect economic activity in the United States and abroad. The information available at the time of the April 27–28 meeting suggested that U.S. real gross domestic product (GDP) had increased in the first quarter of 2021 at a pace that was faster than in the fourth quarter of last year but had not yet returned to its pre-pandemic level. Labor market conditions improved markedly in March, though employment remained well below its level at the start of 2020. Consumer price inflation through February—as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE)—continued to run well below 2 percent.Total nonfarm payroll employment surged in March, with a notable gain in the leisure and hospitality sector. As of March, payroll employment had retraced almost two-thirds of the losses seen at the onset of the pandemic. The unemployment rate declined to 6 percent in March, as the number of workers on temporary layoff continued to fall and the number on permanent layoff ticked down. Although the unemployment rates for African Americans and Hispanics fell, both rates remained well above the national average; in addition, the Asian unemployment rate moved up and was equal to the national average in March. The labor force participation rate and employment-to-population ratio increased in March, though both measures remained below their pre-pandemic levels. Initial claims for unemployment insurance had moved down, on net, since mid-March and were at the lowest level since the beginning of the pandemic, though they remained exceptionally high by pre-pandemic standards. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP, which were available through the first half of April, suggested that the rate of increase in private employment had slowed somewhat relative to its earlier robust pace.Average hourly earnings for all employees rose 4.2 percent over the 12 months ending in March. The 12‑month change in average hourly earnings continued to be influenced by the effect of the pandemic on the composition of the workforce; in particular, the concentration of job losses among lower-wage workers since early last year had resulted in large increases in this measure that were not indicative of tight labor market conditions. By contrast, a staff measure of the 12‑month change in the median wage derived from the ADP data was 3.1 percent in March and continued to run below its pre-pandemic pace; this measure had likely been less affected by shifts in the composition of the workforce.Total PCE price inflation was 1.6 percent over the 12 months ending in February and continued to be held down by low rates of resource utilization. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 1.4 percent over the 12 months ending in February, while the trimmed mean measure of 12-month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.6 percent in February. In March, the 12-month change in the consumer price index (CPI) was 2.6 percent, boosted by increases in consumer energy prices, while core CPI inflation was 1.6 percent over the same period. In the first quarter of 2021, the staff's common inflation expectations index, which combines information from many indicators of inflation expectations and inflation compensation, had returned to the level that prevailed in 2018.Real PCE declined in February; however, available indicators—including the components of the nominal retail sales data used to estimate PCE—pointed to a large increase in March and for the first quarter as a whole, with federal stimulus payments having likely supported the March increase. Housing starts bounced back in March following a weather-induced decline in February. Although existing home sales fell in February and March, the declines appeared to reflect continued limited availability of homes for sale rather than weakening demand; in addition, February's drop in new home sales was retraced in March.Available indicators suggested that equipment and intangibles investment had increased in the first quarter of 2021, though at a slower pace than that seen in the fourth quarter of 2020. Likewise, drilling investment appeared to have moved up, boosted in part by higher energy prices. However, investment in nonresidential structures outside of the drilling and mining sector looked as though it had declined further in the first quarter, likely reflecting ongoing uncertainty about the longer-term effects of the pandemic on businesses.Manufacturing output rebounded strongly in March following weather-related disruptions to production in February. The March rise in factory output occurred despite lingering supply constraints; for example, weather-damaged facilities in Texas used to produce petrochemical and plastic materials had not yet been fully repaired, and semiconductor shortages were still weighing on motor vehicle production.Total real government purchases appeared to have moved up in the first quarter after having declined over the second half of 2020. Available data suggested that a jump in federal nondefense purchases had offset a decline in defense purchases; in addition, indicators of real state and local purchases pointed to a small first-quarter increase.Data for February showed a wider nominal U.S. international trade deficit than in January. Both imports and exports fell from their January levels, the first nominal decline in each since last May. Goods imports were held back in February by weakness in imports for automotive products and consumer goods but remained higher than their pre-pandemic level. Nominal goods exports in February were weak in most categories and were still below their pre-pandemic level. Imports and exports of services remained depressed, weighed down by the continued suspension of most international travel.Incoming data were consistent with a sharp slowdown in foreign economic growth in the first quarter, following a tightening of social-distancing restrictions to contain new waves of COVID-19 infections. Nevertheless, the slowdown appeared less severe than observed declines in mobility would have suggested, underscoring that foreign economies continued to adapt to public health restrictions. The most recent indicators showed that economic activity in many advanced foreign economies (AFEs) resumed expanding toward the end of the first quarter amid a partial easing of restrictions. However, a new surge in infections in several countries in Latin America and South Asia, notably India, underscored the fragility of the global recovery. Foreign headline inflation rose considerably, boosted by temporary factors, such as the fading effects of steep price declines seen early last year and the pass-through of price increases for oil and other commodities. However, underlying inflationary pressures appeared to have remained muted.Staff Review of the Financial Situation Investor sentiment improved over the intermeeting period, reflecting a pickup in the pace of vaccinations, prospects for infrastructure spending, and stronger-than-expected labor market and retail sales data. Domestic equity prices increased notably amid declining equity market volatility, and corporate bond spreads narrowed. The nominal Treasury yield curve was little changed, as were measures of inflation compensation. A straight read of overnight index swap quotes suggested that the expected path for the federal funds rate was little changed over the intermeeting period and that the expected policy rate would remain below 25 basis points until the first quarter of 2023. Market-based financing conditions remained accommodative, and bank lending conditions eased markedly. Despite recent improvements, lending standards for commercial and industrial (C&I) and consumer loans remained tighter than pre-pandemic levels.Broad stock price indexes increased over the intermeeting period, with outperformance by technology stocks and stocks sensitive to consumer discretionary spending. One-month option-implied volatility on the S&P 500—the VIX—declined, approaching the median level observed in the decade before the pandemic. Spreads of yields on investment- and speculative-grade corporate bonds over comparable-maturity Treasury yields narrowed moderately. Spreads on municipal bonds were little changed, with yields on such bonds remaining close to their lowest levels in more than 20 years.Domestic short-term funding markets remained stable. Funding rates stayed very low against the backdrop of continued paydowns in Treasury bills and substantial increases in reserve balances stemming from Federal Reserve asset purchases as well as the drawdown in balances maintained in the Treasury General Account associated with stimulus payments and other fiscal outlays. Assets under management increased somewhat for government money market funds (MMFs) but declined slightly for prime MMFs. The weighted average maturity of government and prime MMFs remained elevated.The effective federal funds rate and the SOFR were little changed, averaging 7 basis points and 1 basis point, respectively, over the intermeeting period. There continued to be no participation in the Fed's repo operations. Participation in the Fed's reverse repo facility increased from minimal levels to an average of $47 billion and reached $134 billion on the quarter-end date.Factors that had stressed foreign financial markets earlier this year—rising U.S. interest rates, resurging COVID-19 cases, and renewed lockdowns in a number of countries—appeared less concerning to global investors over the intermeeting period. Most AFE equity indexes rose modestly, and most AFE sovereign bond yields were little changed. In emerging market economies (EMEs), market optimism was tempered in part by rising COVID-19 cases. The broad EME equity price index was little changed, while credit spreads widened somewhat in the most vulnerable EMEs. After robust inflows earlier this year, flows into EME-dedicated funds continued at a moderate pace. The broad dollar index fell modestly.Financing conditions for nonfinancial businesses in capital markets remained highly accommodative over the intermeeting period, as reflected in low corporate bond yields and high price-to-earnings ratios in equity markets. Gross corporate bond issuance and gross leveraged loan issuance were robust in February and March. Equity raised through traditional initial public offerings (IPOs) and seasoned equity offerings, as well as through special purpose acquisition companies, continued to be substantial in March.C&I loans outstanding at banks expanded in February and March after contracting for more than half a year. In the April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), banks reported easing standards, on net, for C&I loans across firms of all sizes over the first quarter. Banks also reported that demand for C&I loans weakened at large and middle-market firms and was basically unchanged at small firms.The credit quality of nonfinancial corporations showed further signs of improvement for lower-rated firms. Following a modest uptick in February, the volume of nonfinancial corporate bond downgrades spiked in March, but the spike reflected the downgrades of a few large and highly rated investment-grade firms. In contrast, for speculative-grade issuers, the volume of upgrades modestly exceeded that of downgrades in February and March. Nonfinancial corporate bond defaults remained at low levels in February and March. Market indicators of future default expectations were little changed and stayed low.Financing conditions in the municipal bond market remained accommodative over the intermeeting period. Issuance of municipal bonds was strong in March, and indicators of the credit quality of municipal debt were little changed in February and March. Financing conditions for small businesses appeared to have improved, with demand for loans remaining subdued. Likely in part because of the Paycheck Protection Program, small business loan originations rose notably in February, the most recent month for which data were available, and were close to pre-pandemic levels. However, even amid improving financing conditions, many small businesses remained under financial stress.For commercial real estate (CRE) financed through capital markets, financing conditions remained accommodative over the intermeeting period. Although overall delinquency rates in agency commercial mortgage-backed securities (CMBS) declined in the past few months, delinquency rates on hotel and retail mortgages in CMBS pools remained high. CRE loans held by banks were little changed in March. In the April SLOOS, changes in lending standards over the first quarter were mixed across CRE loan categories.Financing conditions in the residential mortgage market were little changed over the intermeeting period and remained accommodative for stronger borrowers who met standard conforming loan criteria. Credit remained tight for borrowers with lower credit scores. Mortgage rates for most borrowers were little changed on net. In the April SLOOS, banks reported easing standards on most types of mortgages. The share of mortgages in forbearance declined slightly in March.Financing conditions in consumer credit markets generally remained accommodative for borrowers with strong credit scores but tight for those with subprime scores. Consumer loans grew at a robust pace in February, reflecting the continued expansion of auto loans and a partial rebound in credit card account balances. Banks in the April SLOOS reported easing auto lending standards in the first quarter but generally reported that standards remained tight compared with the end of 2019, especially for nonprime borrowers. Banks also reported that standards on credit cards eased over the first quarter of 2021 but were generally still tighter than before the pandemic. Interest rates offered to nonprime borrowers continued to rise through February, with the fraction of these offers with zero introductory rates continuing to decline.The staff provided an update on its assessments of the stability of the financial system. The staff noted that corporate bond spreads had declined notably since late last year and were at the lower ends of their historical distributions. In addition, measures of the equity risk premium declined further, and nonprice measures, such as high IPO volume, also indicated elevated investor appetite for risk in the equity market. Valuation pressures for CRE remained high, although information related to CRE continued to be noisier than usual due to pandemic-induced declines in transactions. House price growth increased further, with house prices outpacing rents. In contrast, vulnerabilities from both household and business debt had diminished, reflecting continued government support, a slower pace of business borrowing, and improving business earnings, although many households and businesses continued to struggle. Regarding financial leverage, the staff noted that bank capital ratios remained above pre-pandemic levels in the fourth quarter, but risks remained. Leverage among hedge funds was elevated and increased in the third quarter of last year for the most highly leveraged funds. Leverage in hedge funds' prime brokerage accounts rose notably through the fourth quarter of last year, reflecting elevated hedge fund leverage related to their stock market activities. The staff highlighted recent episodes underlining the opacity of risk exposures among some leveraged entities. With regard to funding risks, the staff noted that MMFs and open-end mutual funds faced significant structural vulnerabilities associated with liquidity transformation. Assets under management at MMFs declined during the second half of 2020, while open-end mutual fund holdings of corporate bonds rose during the second half of last year.Staff Economic Outlook The U.S. economic projection prepared by the staff for the April FOMC meeting was slightly stronger than the March forecast. Real GDP growth was projected to post a substantial increase this year, with a correspondingly rapid decline in the unemployment rate, as further reductions in social distancing and favorable financial conditions were expected to support output growth. With the boost to growth from continued reductions in social distancing assumed to fade after 2021, GDP growth was expected to step down in 2022 and 2023. However, with monetary policy assumed to remain highly accommodative, the staff continued to anticipate that real GDP growth would outpace that of potential over much of this period, leading to a decline in the unemployment rate to historically low levels.The staff's outlook for inflation was broadly unchanged. The 12‑month changes in total and core PCE prices were expected to move above 2 percent in coming months as the unusually low readings from the spring of 2020 dropped out of the calculation window and as a recent jump in consumer energy prices pushed up the total measure. Core inflation was expected to ease some later in the year but to remain above 2 percent at the end of 2021, boosted by large increases in import prices, a recovery in prices that had been especially affected by the pandemic, and the temporary effects of supply bottlenecks. Inflation was then projected to dip slightly below 2 percent in 2022 as the influence of these transitory factors diminished, before returning to 2 percent by the end of 2023, supported by sustained tight levels of resource utilization in labor and product markets.The staff continued to judge that the risks to the baseline projection for economic activity were skewed to the downside and that the uncertainty around the forecast was elevated. In particular, despite the demonstrated resilience of the economy to surges in the pandemic over the past year, the possibility that COVID-19 variants that were more contagious or more resistant to existing vaccines would spread posed a salient downside risk. The staff continued to view the risks around the inflation projection as balanced. On the upside, bottlenecks, supply disruptions, and historically high rates of resource utilization were seen as potential sources of greater-than-expected inflationary pressures. Alternatively, the possibility that inflation would be held down by low underlying trend inflation and a weaker-than-expected response to resource utilization was seen as an important downside risk.Participants' Views on Current Conditions and the Economic Outlook In their discussion of current conditions, participants noted that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment had strengthened. The sectors most adversely affected by the pandemic remained weak but had shown improvement. Inflation had risen, largely reflecting transitory factors. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Participants noted that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continued to weigh on the economy, and risks to the economic outlook remained.Participants observed that economic activity had picked up sharply this year, with robust gains in consumer spending, housing-sector activity, business equipment investment, and manufacturing production. They noted that the acceleration in economic activity reflected positive developments associated with the rapid pace of vaccinations as well as continued support from fiscal and monetary policies. Nevertheless, participants generally noted that the economy remained far from the Committee's maximum-employment and price-stability goals.In their discussion of the household sector, participants remarked that indicators of consumer spending surged in March and expected that further gains in spending would contribute significantly to the economic recovery. Many participants commented that fiscal stimulus, accommodative financial conditions, the release of pent-up demand, progress on widespread vaccination, and the ongoing reduction of social-distancing measures were important factors supporting spending. Many participants also noted that consumer spending would continue to be bolstered by these factors as well as by the elevated level of accumulated household savings. Several participants observed that housing market activity continued to be strong, supported in part by low interest rates.With respect to the business sector, participants noted that business equipment investment continued to rise at a robust pace and manufacturing activity was expanding at a strong clip. That said, many participants discussed reports of shortages of materials and labor as well as supply chain bottlenecks as likely restraints to the pace of recovery in manufacturing and other business sectors. Many participants also noted that their District contacts had reported a pickup in activity in the leisure, travel, and hospitality sectors. Those contacts had grown increasingly optimistic about overall business conditions, given ongoing progress on vaccinations, easing of restrictions on in-person activities, and substantial fiscal support. A couple of participants reported improved conditions in the agricultural sector, with farmers' income supported by higher crop prices and federal aid payments.Participants commented on the continued improvement in labor market conditions in recent months. Job gains in the March employment report were strong, and the unemployment rate fell to 6.0 percent. Even so, participants judged that the economy was far from achieving the Committee's broad-based and inclusive maximum-employment goal. Payroll employment was 8.4 million jobs below its pre-pandemic level. Some participants noted that the labor market recovery continued to be uneven across demographic and income groups and across sectors. Many participants also remarked that business contacts in their Districts reported having trouble hiring workers, likely reflecting factors such as early retirements, health concerns, childcare responsibilities, and expanded unemployment insurance benefits. Many participants noted as well that these factors were depressing the labor force participation rate, relative to its pre-pandemic level. Some of these factors were seen as likely to remain significant while pandemic-related risks persisted. Based on reports from business contacts, some participants noted that the step-up in demand for labor had started to put some upward pressure on wages. Moreover, over the medium term, participants expected labor market conditions to continue to improve, supported by accommodative fiscal and monetary policies as well as continued progress on vaccinations, unwinding of social distancing, and the associated recovery in economic activity. A couple of participants remarked that businesses in industries severely affected by the pandemic were downsizing or that some businesses were focused on cutting costs or increasing productivity, particularly through automation.In their comments about inflation, participants anticipated that inflation as measured by the 12-month change of the PCE price index would move above 2 percent in the near term as very low readings from early in the pandemic fall out of the calculation. In addition, increases in oil prices were expected to pass through to consumer energy prices. Participants also noted that the expected surge in demand as the economy reopens further, along with some transitory supply chain bottlenecks, would contribute to PCE price inflation temporarily running somewhat above 2 percent. After the transitory effects of these factors fade, participants generally expected measured inflation to ease. Looking further ahead, participants expected inflation to be at levels consistent with achieving the Committee's objectives over time. A number of participants remarked that supply chain bottlenecks and input shortages may not be resolved quickly and, if so, these factors could put upward pressure on prices beyond this year. They noted that in some industries, supply chain disruptions appeared to be more persistent than originally anticipated and reportedly had led to higher input costs. Despite the expected short-run fluctuations in measured inflation, many participants commented that various measures of longer-term inflation expectations remained well anchored at levels broadly consistent with achieving the Committee's longer-run goals.Participants judged that uncertainty was elevated and that the outlook was highly dependent on the course of the virus. Amid considerable progress on vaccinations, the unwinding of social distancing, and strong policy support, participants assessed that risks to the outlook were no longer as elevated as in previous months. Nevertheless, some participants remarked that the pandemic continued to pose downside risks to the economic outlook and noted the potential for an uneven recovery in light of new virus strains and potential hesitancy regarding vaccination. As upside risks, some participants mentioned that the release of pent-up demand, accumulated excess household savings, and rapid progress on vaccinations, amid continued fiscal and monetary support, could boost economic activity and bring individuals back into the labor force more quickly than currently expected. Some participants mentioned upside risks around the inflation outlook that could arise if temporary factors influencing inflation turned out to be more persistent than expected.Participants who commented on financial stability agreed that the financial sector had shown resilience during the pandemic, in large part reflecting strong policy support. Some remarked that the capital positions and loan loss reserves at large banks remained high, and earnings were strong. A few participants noted that vulnerabilities from both business and household debt were at a moderate level. Nevertheless, a couple of participants highlighted that forbearance programs instituted in response to the pandemic could be masking vulnerabilities among households and businesses. Regarding asset valuations, several participants noted that risk appetite in capital markets was elevated, as equity valuations had risen further, IPO activity remained high, and risk spreads on corporate bonds were at the bottom of their historical distribution. A couple of participants remarked that, should investor risk appetite fall, an associated drop in asset prices coupled with high business and financial leverage could have adverse implications for the real economy. A number of participants commented on valuation pressures being somewhat elevated in the housing market. Some participants mentioned the potential risks to the financial system stemming from the activities of hedge funds and other leveraged investors, commenting on the limited visibility into the activities of these entities or on the prudential risk-management practices of dealers' prime-brokerage businesses. Some participants highlighted potential vulnerabilities in other parts of the financial system, including run-prone investment funds in short-term funding and credit markets. Various participants commented on the prolonged period of low interest rates and highly accommodative financial market conditions and the possibility for these conditions to lead to reach-for-yield behavior that could raise financial stability risks.In their consideration of the stance of monetary policy, participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time, thereby promoting the Committee's statutory goals of maximum employment and price stability. Participants agreed that the economy was still far from the Committee's longer-run goals. Moreover, the path ahead continued to depend on the course of the virus, and risks to the economic outlook remained. Consequently, participants judged that the current stance of policy and policy guidance remained appropriate to foster further economic recovery as well as to achieve inflation that averages 2 percent over time and longer-term inflation expectations that continue to be well anchored at 2 percent.Participants judged that the Committee's current guidance for the federal funds rate and asset purchases was serving the economy well. Participants also noted that the existing outcome-based guidance implied that the path of the federal funds rate and the balance sheet would depend on actual progress toward reaching the Committee's maximum-employment and inflation goals. In particular, some participants emphasized that an important feature of the outcome-based guidance was that policy would be set based on observed progress toward the Committee's goals, not on uncertain economic forecasts. However, a couple of participants commented on the risks of inflation pressures building up to unwelcome levels before they become sufficiently evident to induce a policy reaction.In their discussion of the Federal Reserve's asset purchases, various participants noted that it would likely be some time until the economy had made substantial further progress toward the Committee's maximum-employment and price-stability goals relative to the conditions prevailing in December 2020 when the Committee first provided its guidance for asset purchases. Consistent with the Committee's outcome-based guidance, purchases would continue at least at the current pace until that time. Many participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals. A number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. They noted that amid progress on vaccinations and strong policy support, indicators of economic activity and employment had strengthened. Although the sectors most adversely affected by the pandemic remained weak, they had shown improvement. Inflation had risen, largely reflecting transitory factors. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Members also remarked that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. In addition, members agreed that the ongoing public health crisis continued to weigh on the economy and risks to the economic outlook remained.Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals. All members reaffirmed that, in accordance with the Committee's goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run and with inflation running persistently below this longer-run goal, they would aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. Members expected to maintain an accommodative stance of monetary policy until those outcomes were achieved.All members agreed to keep the target range for the federal funds rate at 0 to 1/4 percent, and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time. In addition, members agreed that it would be appropriate for the Federal Reserve to continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made toward the Committee's maximum-employment and price-stability goals. They judged that these asset purchases would help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook and that they would be prepared to adjust the stance of monetary policy as appropriate in the event that risks emerged that could impede the attainment of the Committee's goals. Members also concurred that, in assessing the appropriate stance of monetary policy, they would take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.Members agreed that the postmeeting statement should acknowledge that indicators of economic activity and employment had strengthened but that, despite showing improvement, the sectors of the economy most affected by the pandemic remained weak. Members also judged that, while risks to the outlook remained, continued progress on vaccinations and accommodative monetary and fiscal policies most likely would underpin further gains in economic activity and employment and would limit risks to the outlook. As a result, they agreed to remove the characterization of risks as "considerable" in the FOMC statement. With regard to the characterization of inflation, members agreed that the statement should note that inflation had risen but that the increase largely reflected transitory factors. They noted that inflation as measured by the 12-month change of the PCE price index was expected to move above 2 percent as the very low readings from early in the pandemic fell out of the calculation and as past increases in oil prices passed through to consumer energy prices. The expected rebound in spending as the economy continued to reopen was also likely to boost inflation temporarily, particularly if supply bottlenecks limited how quickly production could respond to demand in the near term. However, members also viewed these increases in prices as likely to have only transitory effects on inflation.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective April 29, 2021, the Federal Open Market Committee directs the Desk to:The vote also encompassed approval of the statement below for release at 2:00 p.m.:"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective April 29, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, June 15–16, 2021. The meeting adjourned at 10:20 a.m. on April 28, 2021.Notation Vote By notation vote completed on April 6, 2021, the Committee unanimously approved the minutes of the Committee meeting held on March 16–17, 2021. _______________________ James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended through the discussion of repurchase agreement arrangements. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2021 04 28Consumer Resources January 28-29, 2020A joint meeting of the Federal Open Market Committee and the Board of Governors was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, January 28, 2020, at 10:00 a.m. and continued on Wednesday, January 29, 2020, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chairman John C. Williams, Vice Chairman Michelle W. Bowman Lael Brainard Richard H. Clarida Patrick Harker Robert S. Kaplan Neel Kashkari Loretta J. Mester Randal K. QuarlesThomas I. Barkin, Raphael W. Bostic, Mary C. Daly, Charles L. Evans, and Michael Strine,2 Alternate Members of the Federal Open Market CommitteeJames Bullard, Esther L. George, and Eric Rosengren, Presidents of the Federal Reserve Banks of St. Louis, Kansas City, and Boston, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Thomas Laubach, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, Marc Giannoni, Joseph W. Gruber, David E. Lebow, Trevor A. Reeve, Ellis W. Tallman, William Wascher, and Mark L.J. Wright, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsEric Belsky,3 Director, Division of Consumer and Community Affairs, Board of Governors; Matthew J. Eichner,4 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Steven B. Kamin, Director, Division of International Finance, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsRochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board of Governors; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Office of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Office of Board Members, Board of GovernorsAntulio N. Bomfim, Brian M. Doyle, Wendy E. Dunn, Ellen E. Meade, and Ivan Vidangos, Special Advisers to the Board, Office of Board Members, Board of GovernorsLinda Robertson and David W. Skidmore, Assistants to the Board, Office of Board Members, Board of GovernorsDavid Bowman,5 Senior Associate Director, Division of Monetary Affairs, Board of Governors; Eric M. Engen and Michael G. Palumbo, Senior Associate Directors, Division of Research and Statistics, Board of Governors; John W. Schindler, Senior Associate Director, Division of Financial Stability, Board of GovernorsDon H. Kim and Edward Nelson, Senior Advisers, Division of Monetary Affairs, Board of GovernorsEric C. Engstrom, Senior Adviser, Division of Research and Statistics, and Deputy Associate Director, Division of Monetary Affairs, Board of GovernorsElizabeth Klee,3 Associate Director, Division of Financial Stability, Board of GovernorsChristopher J. Gust,5 Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Norman J. Morin and Steven A. Sharpe, Deputy Associate Directors, Division of Research and Statistics, Board of Governors; Jeffrey D. Walker,4 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Paul R. Wood,3 Deputy Associate Director, Division of International Finance, Board of GovernorsRicardo Correa and Stephanie E. Curcuru,6 Assistant Directors, Division of International Finance, Board of Governors; Giovanni Favara and Zeynep Senyuz,5 Assistant Directors, Division of Monetary Affairs, Board of GovernorsPenelope A. Beattie,3 Section Chief, Office of the Secretary, Board of Governors; Dana L. Burnett, Section Chief, Division of Monetary Affairs, Board of GovernorsHess T. Chung,3 Group Manager, Division of Research and Statistics, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Jonathan E. Goldberg, Judit Temesvary, and Francisco Vazquez-Grande, Principal Economists, Division of Monetary Affairs, Board of Governors; Daniel J. Vine, Principal Economist, Division of Research and Statistics, Board of GovernorsFrancesco Ferrante, Senior Economist, Division of International Finance, Board of Governors; Michael Siemer,3 Senior Economist, Division of Research and Statistics, Board of Governors; Manjola Tase, Senior Economist, Division of Monetary Affairs, Board of GovernorsJames Hebden,3 Senior Technology Analyst, Division of Monetary Affairs, Board of GovernorsMark A. Gould, First Vice President, Federal Reserve Bank of San FranciscoDavid Altig,3 Kartik B. Athreya, Jeffrey Fuhrer, Anna Paulson, and Christopher J. Waller, Executive Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, Boston, Chicago, and St. Louis, respectivelyJulie Ann Remache,5 Samuel Schulhofer-Wohl,5 and Keith Sill, Senior Vice Presidents, Federal Reserve Banks of New York, Chicago, and Philadelphia, respectivelyJonathan P. McCarthy, Ed Nosal, Matthew D. Raskin,5 and Patricia Zobel, Vice Presidents, Federal Reserve Banks of New York, Atlanta, New York, and New York, respectivelyLarry Wall,3 Executive Director, Federal Reserve Bank of AtlantaÒscar Jordà, Senior Policy Advisor, Federal Reserve Bank of San FranciscoEdward S. Prescott,3 Senior Economist and Policy Advisor, Federal Reserve Bank of ClevelandBrent Bundick, Research and Policy Advisor, Federal Reserve Bank of Kansas CityAnnual Organizational Matters7 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 28, 2020, were received and that these individuals executed their oaths of office.The elected members and alternate members were as follows:John C. Williams, President of the Federal Reserve Bank of New York, with Michael Strine, First Vice President of the Federal Reserve Bank of New York, as alternatePatrick Harker, President of the Federal Reserve Bank of Philadelphia, with Thomas I. Barkin, President of the Federal Reserve Bank of Richmond, as alternateLoretta J. Mester, President of the Federal Reserve Bank of Cleveland, with Charles L. Evans, President of the Federal Reserve Bank of Chicago, as alternateRobert S. Kaplan, President of the Federal Reserve Bank of Dallas, with Raphael W. Bostic, President of the Federal Reserve Bank of Atlanta, as alternateNeel Kashkari, President of the Federal Reserve Bank of Minneapolis, with Mary C. Daly, President of the Federal Reserve Bank of San Francisco, as alternateBy unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2021:By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA).By unanimous vote, the Committee selected Lorie K. Logan to serve at the pleasure of the Committee as manager of the SOMA, on the understanding that her selection was subject to being satisfactory to the Federal Reserve Bank of New York.Secretary's note: The Federal Reserve Bank of New York subsequently sent advice that the manager selection indicated previously was satisfactory.By unanimous vote, the Committee voted to reaffirm without revision the Authorization for Domestic Open Market Operations as shown below. The Guidelines for the Conduct of System Open Market Operations in Federal-Agency Issues remained suspended.AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS (As reaffirmed effective January 28, 2020)OPEN MARKET TRANSACTIONS1. The Federal Open Market Committee (the "Committee") authorizes and directs the Federal Reserve Bank selected by the Committee to execute open market transactions (the "Selected Bank"), to the extent necessary to carry out the most recent domestic policy directive adopted by the Committee:A. To buy or sell in the open market securities that are direct obligations of, or fully guaranteed as to principal and interest by, the United States, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, that are eligible for purchase or sale under Section 14(b) of the Federal Reserve Act ("Eligible Securities") for the System Open Market Account ("SOMA"):i. As an outright operation with securities dealers and foreign and international accounts maintained at the Selected Bank: on a same-day or deferred delivery basis (including such transactions as are commonly referred to as dollar rolls and coupon swaps) at market prices; orii. As a temporary operation: on a same-day or deferred delivery basis, to purchase such Eligible Securities subject to an agreement to resell ("repo transactions") or to sell such Eligible Securities subject to an agreement to repurchase ("reverse repo transactions") for a term of 65 business days or less, at rates that, unless otherwise authorized by the Committee, are determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual counterparties;B. To allow Eligible Securities in the SOMA to mature without replacement;C. To exchange, at market prices, in connection with a Treasury auction, maturing Eligible Securities in the SOMA with the Treasury, in the case of Eligible Securities that are direct obligations of the United States or that are fully guaranteed as to principal and interest by the United States; andD. To exchange, at market prices, maturing Eligible Securities in the SOMA with an agency of the United States, in the case of Eligible Securities that are direct obligations of that agency or that are fully guaranteed as to principal and interest by that agency.SECURITIES LENDING2. In order to ensure the effective conduct of open market operations, the Committee authorizes the Selected Bank to operate a program to lend Eligible Securities held in the SOMA to dealers on an overnight basis (except that the Selected Bank may lend Eligible Securities for longer than an overnight term to accommodate weekend, holiday, and similar trading conventions).A. Such securities lending must be:i. At rates determined by competitive bidding;ii. At a minimum lending fee consistent with the objectives of the program;iii. Subject to reasonable limitations on the total amount of a specific issue of Eligible Securities that may be auctioned; andiv. Subject to reasonable limitations on the amount of Eligible Securities that each borrower may borrow.B. The Selected Bank may:i. Reject bids that, as determined in its sole discretion, could facilitate a bidder's ability to control a single issue;ii. Accept Treasury securities or cash as collateral for any loan of securities authorized in this paragraph 2; andiii. Accept agency securities as collateral only for a loan of agency securities authorized in this paragraph 2.OPERATIONAL READINESS TESTING3. The Committee authorizes the Selected Bank to undertake transactions of the type described in paragraphs 1 and 2 from time to time for the purpose of testing operational readiness, subject to the following limitations:A. All transactions authorized in this paragraph 3 shall be conducted with prior notice to the Committee;B. The aggregate par value of the transactions authorized in this paragraph 3 that are of the type described in paragraph 1.A.i, 1.B, 1.C and 1.D shall not exceed $5 billion per calendar year; andC. The outstanding amount of the transactions described in paragraphs 1.A.ii and 2 shall not exceed $5 billion at any given time.TRANSACTIONS WITH CUSTOMER ACCOUNTS4. In order to ensure the effective conduct of open market operations, while assisting in the provision of short-term investments or other authorized services for foreign central bank and international accounts maintained at a Federal Reserve Bank (the "Foreign Accounts") and accounts maintained at a Federal Reserve Bank as fiscal agent of the United States pursuant to section 15 of the Federal Reserve Act (together with the Foreign Accounts, the "Customer Accounts"), the Committee authorizes the following when undertaken on terms comparable to those available in the open market:A. The Selected Bank, for the SOMA, to undertake reverse repo transactions in Eligible Securities held in the SOMA with the Customer Accounts for a term of 65 business days or less; andB. Any Federal Reserve Bank that maintains Customer Accounts, for any such Customer Account, when appropriate and subject to all other necessary authorization and approvals, to:i. Undertake repo transactions in Eligible Securities with dealers with a corresponding reverse repo transaction in such Eligible Securities with the Customer Accounts; andii. Undertake intra-day repo transactions in Eligible Securities with Foreign Accounts.Transactions undertaken with Customer Accounts under the provisions of this paragraph 4 may provide for a service fee when appropriate. Transactions undertaken with Customer Accounts are also subject to the authorization or approval of other entities, including the Board of Governors of the Federal Reserve System and, when involving accounts maintained at a Federal Reserve Bank as fiscal agent of the United States, the United States Department of the Treasury.ADDITIONAL MATTERS5. The Committee authorizes the Chairman of the Committee, in fostering the Committee's objectives during any period between meetings of the Committee, to instruct the Selected Bank to act on behalf of the Committee to:A. Adjust somewhat in exceptional circumstances the stance of monetary policy and to take actions that may result in material changes in the composition and size of the assets in the SOMA; orB. Undertake transactions with respect to Eligible Securities in order to appropriately address temporary disruptions of an operational or highly unusual nature in U.S. dollar funding markets.Any such adjustment described in subparagraph A of this paragraph 5 shall be made in the context of the Committee's discussion and decision about the stance of policy at its most recent meeting and the Committee's long-run objectives to foster maximum employment and price stability, and shall be based on economic, financial, and monetary developments since the most recent meeting of the Committee. The Chairman, whenever feasible, will consult with the Committee before making any instruction under this paragraph 5.The Committee voted unanimously to reaffirm without revision the Authorization for Foreign Currency Operations and the Foreign Currency Directive as shown below.AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS (As reaffirmed effective January 28, 2020)IN GENERAL1. The Federal Open Market Committee (the "Committee") authorizes the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions for the System Open Market Account as provided in this Authorization, to the extent necessary to carry out any foreign currency directive of the Committee:A. To purchase and sell foreign currencies (also known as cable transfers) at home and abroad in the open market, including with the United States Treasury, with foreign monetary authorities, with the Bank for International Settlements, and with other entities in the open market. This authorization to purchase and sell foreign currencies encompasses purchases and sales through standalone spot or forward transactions and through foreign exchange swap transactions. For purposes of this Authorization, foreign exchange swap transactions are: swap transactions with the United States Treasury (also known as warehousing transactions), swap transactions with other central banks under reciprocal currency arrangements, swap transactions with other central banks under standing dollar liquidity and foreign currency liquidity swap arrangements, and swap transactions with other entities in the open market.B. To hold balances of, and to have outstanding forward contracts to receive or to deliver, foreign currencies.2. All transactions in foreign currencies undertaken pursuant to paragraph 1 above shall, unless otherwise authorized by the Committee, be conducted:A. In a manner consistent with the obligations regarding exchange arrangements under Article IV of the Articles of Agreement of the International Monetary Fund (IMF).1B. In close and continuous cooperation and consultation, as appropriate, with the United States Treasury.C. In consultation, as appropriate, with foreign monetary authorities, foreign central banks, and international monetary institutions.D. At prevailing market rates.STANDALONE SPOT AND FORWARD TRANSACTIONS3. For any operation that involves standalone spot or forward transactions in foreign currencies:A. Approval of such operation is required as follows:i. The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the "Subcommittee") must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available.ii. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee.B. Such an operation also shall be:i. Generally directed at countering disorderly market conditions; orii. Undertaken to adjust System balances in light of probable future needs for currencies; oriii. Conducted for such other purposes as may be determined by the Committee.C. For purposes of this Authorization, the overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.WAREHOUSING4. The Committee authorizes the Selected Bank, with the prior approval of the Subcommittee and at the request of the United States Treasury, to conduct swap transactions with the United States Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934 under agreements in which the Selected Bank purchases foreign currencies from the Exchange Stabilization Fund and the Exchange Stabilization Fund repurchases the foreign currencies from the Selected Bank at a later date (such purchases and sales also known as warehousing).RECIPROCAL CURRENCY ARRANGEMENTS, AND STANDING DOLLAR AND FOREIGN CURRENCY LIQUIDITY SWAPS5. The Committee authorizes the Selected Bank to maintain reciprocal currency arrangements established under the North American Framework Agreement, standing dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements as provided in this Authorization and to the extent necessary to carry out any foreign currency directive of the Committee.A. For reciprocal currency arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).B. For standing dollar liquidity swap arrangements all drawings must be approved in advance by the Chairman. The Chairman may approve a schedule of potential drawings, and may delegate to the manager, System Open Market Account, the authority to approve individual drawings that occur according to the schedule approved by the Chairman.C. For standing foreign currency liquidity swap arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).D. Operations involving standing dollar liquidity swap arrangements and standing foreign currency liquidity swap arrangements shall generally be directed at countering strains in financial markets in the United States or abroad, or reducing the risk that they could emerge, so as to mitigate their effects on economic and financial conditions in the United States.E. For reciprocal currency arrangements, standing dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements:i. All arrangements are subject to annual review and approval by the Committee;ii. Any new arrangements must be approved by the Committee; andiii. Any changes in the terms of existing arrangements must be approved in advance by the Chairman. The Chairman shall keep the Committee informed of any changes in terms, and the terms shall be consistent with principles discussed with and guidance provided by the Committee.OTHER OPERATIONS IN FOREIGN CURRENCIES6. Any other operations in foreign currencies for which governance is not otherwise specified in this Authorization (such as foreign exchange swap transactions with private‑sector counterparties) must be authorized and directed in advance by the Committee.FOREIGN CURRENCY HOLDINGS7. The Committee authorizes the Selected Bank to hold foreign currencies for the System Open Market Account in accounts maintained at foreign central banks, the Bank for International Settlements, and such other foreign institutions as approved by the Board of Governors under Section 214.5 of Regulation N, to the extent necessary to carry out any foreign currency directive of the Committee.A. The Selected Bank shall manage all holdings of foreign currencies for the System Open Market Account:i. Primarily, to ensure sufficient liquidity to enable the Selected Bank to conduct foreign currency operations as directed by the Committee;ii. Secondarily, to maintain a high degree of safety;iii. Subject to paragraphs 7.A.i and 7.A.ii, to provide the highest rate of return possible in each currency; andiv. To achieve such other objectives as may be authorized by the Committee.B. The Selected Bank may manage such foreign currency holdings by:i. Purchasing and selling obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof ("Permitted Foreign Securities") through outright purchases and sales;ii. Purchasing Permitted Foreign Securities under agreements for repurchase of such Permitted Foreign Securities and selling such securities under agreements for the resale of such securities; andiii. Managing balances in various time and other deposit accounts at foreign institutions approved by the Board of Governors under Regulation N.C. The Subcommittee, in consultation with the Committee, may provide additional instructions to the Selected Bank regarding holdings of foreign currencies.ADDITIONAL MATTERS8. The Committee authorizes the Chairman:A. With the prior approval of the Committee, to enter into any needed agreement or understanding with the Secretary of the United States Treasury about the division of responsibility for foreign currency operations between the System and the United States Treasury;B. To advise the Secretary of the United States Treasury concerning System foreign currency operations, and to consult with the Secretary on policy matters relating to foreign currency operations;C. To designate Federal Reserve System persons authorized to communicate with the United States Treasury concerning System Open Market Account foreign currency operations; andD. From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary and Financial Policies.9. The Committee authorizes the Selected Bank to undertake transactions of the type described in this Authorization, and foreign exchange and investment transactions that it may be otherwise authorized to undertake, from time to time for the purpose of testing operational readiness. The aggregate amount of such transactions shall not exceed $2.5 billion per calendar year. These transactions shall be conducted with prior notice to the Committee.10. All Federal Reserve banks shall participate in the foreign currency operations for System Open Market Account in accordance with paragraph 3G(1) of the Board of Governors' Statement of Procedure with Respect to Foreign Relationships of Federal Reserve Banks dated January 1, 1944.11. Any authority of the Subcommittee pursuant to this Authorization may be exercised by the Chairman if the Chairman believes that consultation with the Subcommittee is not feasible in the time available. The Chairman shall promptly report to the Subcommittee any action approved by the Chairman pursuant to this paragraph.12. The Committee authorizes the Chairman, in exceptional circumstances where it would not be feasible to convene the Committee, to foster the Committee's objectives by instructing the Selected Bank to engage in foreign currency operations not otherwise authorized pursuant to this Authorization. Any such action shall be made in the context of the Committee's discussion and decisions regarding foreign currency operations. The Chairman, whenever feasible, will consult with the Committee before making any instruction under this paragraph.FOREIGN CURRENCY DIRECTIVE (As reaffirmed effective January 28, 2020)1. The Committee directs the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions, for the System Open Market Account, in accordance with the provisions of the Authorization for Foreign Currency Operations (the "Authorization") and subject to the limits in this Directive.2. The Committee directs the Selected Bank to execute warehousing transactions, if so requested by the United States Treasury and if approved by the Foreign Currency Subcommittee (the "Subcommittee"), subject to the limitation that the outstanding balance of United States dollars provided to the United States Treasury as a result of these transactions not at any time exceed $5 billion.3. The Committee directs the Selected Bank to maintain, for the System Open Market Account:A. Reciprocal currency arrangements with the following foreign central banks:B. Standing dollar liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National BankC. Standing foreign currency liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National Bank4. The Committee directs the Selected Bank to hold and to invest foreign currencies in the portfolio in accordance with the provisions of paragraph 7 of the Authorization.5. The Committee directs the Selected Bank to report to the Committee, at each regular meeting of the Committee, on transactions undertaken pursuant to paragraphs 1 and 6 of the Authorization. The Selected Bank is also directed to provide quarterly reports to the Committee regarding the management of the foreign currency holdings pursuant to paragraph 7 of the Authorization.6. The Committee directs the Selected Bank to conduct testing of transactions for the purpose of operational readiness in accordance with the provisions of paragraph 9 of the Authorization.By unanimous vote, the Committee amended its Program for Security of FOMC Information (Program) with three sets of changes, effective February 1, 2020. These changes consisted of (1) an update to the rules for eligibility for access to FOMC information to reflect two new policies approved by the Board; (2) the addition of references to existing Federal Reserve polices that help safeguard FOMC information; and (3) organizational and technical changes to improve the consistency and accuracy of Program language.By unanimous vote, the Committee provided approval for the publication of a Federal Register notice of proposed rulemaking that seeks public comment on minor and technical updates to the FOMC Rules Regarding Availability of Information, which are the Committee's Freedom of Information Act rules.Review of Monetary Policy Strategy, Tools, and Communication Practices Participants continued their discussion related to the ongoing review of the Federal Reserve's monetary policy strategy, tools, and communication practices. At this meeting, the discussion focused on two topics: the potential interactions between monetary policy and financial stability and the potential use of inflation ranges around the Committee's 2 percent inflation objective. The staff briefing on the first topic noted that in the current environment of low neutral rates, achieving the Committee's dual-mandate goals of maximum employment and price stability would require low policy rates frequently, regardless of the monetary policy strategy and tools chosen. Consequently, policy strategies and tools that help support a stronger economy and anchor inflation expectations at a level consistent with the Committee's objective in a low-neutral-rate environment can help promote financial stability. In addition, the staff reported that the available empirical evidence suggests that the effects of changes in policy rates on asset prices and risk premiums tend to be modest relative to the historical fluctuations in those measures. However, there may be circumstances in which a persistently accommodative policy stance that is otherwise consistent with the dual-mandate goals may contribute to an increase in financial system vulnerabilities, including through increased borrowing, financial leverage, and valuation pressures. The staff noted that clear communications of the Committee's ongoing assessments of the interactions between monetary policy and financial stability could help avoid large interest rate surprises that could otherwise contribute to financial vulnerabilities. The briefing concluded with a short review of how other central banks have approached this issue, including the use of financial instability escape clauses to provide leeway for the central bank to deviate from its usual monetary policy strategy if financial vulnerabilities become significant.In their discussion of the effects that alternative monetary policy strategies and tools might have on financial stability, participants noted that macroeconomic stability and the achievement of the Committee's dual mandate depended on a stable financial system. An unstable financial system may amplify shocks to the economy and exacerbate increases in unemployment or drive inflation further away from the Committee's goal. With respect to the relationship between monetary policy and financial stability, some participants noted that evidence regarding the link between the policy stance and elevated financial vulnerabilities was limited, with a couple of participants further observing that there were not many episodes of persistently low interest rates. In addition, some past episodes of heightened financial vulnerabilities were associated with excessive risk-taking behavior that did not seem to be very responsive to typical changes in interest rates. A number of participants judged that, under some circumstances, low policy rates might help foster financial stability provided they are needed to support strong economic conditions and price stability. Some participants remarked, however, that keeping policy rates low to achieve both of the Committee's dual-mandate objectives may contribute to a buildup of financial vulnerabilities, especially at times when the economy is at or above full employment, a development that could pose future risks to the economy and to the ability of the Committee to achieve its dual mandate.Participants discussed how financial stability considerations should be incorporated in the conduct of monetary policy. They generally agreed that supervisory, regulatory, and macroprudential tools should be the primary means to address financial stability risks. A few participants commented that this is especially the case when addressing risks associated with structural features such as the current low level of neutral interest rates. A number of participants noted that countercyclical macroprudential tools, such as the countercyclical capital buffer, could be used to address cyclical financial stability risks. However, various participants noted that while these tools could be deployed proactively to lean against the buildup of financial vulnerabilities, they have some limitations in the context of the U.S. financial system, where the few available tools are, for the most part, not designed to address vulnerabilities outside the banking sector. In addition, these tools are not within the authority of the Committee, and their use requires coordination with other prudential regulators. Recognizing these limitations, many participants remarked that the Committee should not rule out the possibility of adjusting the stance of monetary policy to mitigate financial stability risks, particularly when those risks have important implications for the economic outlook and when macroprudential tools had been or were likely to be ineffective at mitigating those risks. Nevertheless, many participants noted that the current knowledge of the interactions between the stance of monetary policy and financial vulnerabilities is too imprecise to warrant systematically adjusting monetary policy in response to the evolution of financial stability risks. As a result, monetary policy should be guided primarily by the outlook for employment and inflation, and it should respond to financial stability risks only insofar as such risks significantly threaten the achievement of the Committee's mandate. Several participants observed that the monetary policy measures needed to curb financial stability risks could be quite large, and the resulting effects on employment and inflation could place a high hurdle for such measures. Some participants remarked that, because financial stability risks are a consideration for achieving the Committee's dual mandate, a clear communications strategy would be needed to convey the Committee's assessments of financial vulnerabilities and their potential implications for the monetary policy outlook. Several participants noted that a communications strategy could include the possible use of financial instability escape clauses to help explain the rationale for policy actions when a buildup of financial vulnerabilities poses risks to the achievement of the Committee's goals.The staff's briefing on considerations regarding the use of an inflation range focused on three different concepts of an inflation range. First, an uncertainty range could communicate the magnitude of the inherent variability of inflation that would still be consistent with achieving the Committee's symmetric inflation objective. Second, an operational range could signal that, under some conditions, the Committee would prefer inflation to be away from its longer-run objective for a time; such a range could potentially be used as part of a makeup policy strategy, including one based on average inflation targeting, or in other strategies aimed at offsetting the adverse effects of a binding effective lower bound on policy rates. Third, an indifference range could communicate that monetary policy would not respond to deviations of inflation within that range. The briefing also summarized the experiences of foreign central banks that use inflation ranges; these ranges were typically put in place many years ago, often in conjunction with adopting an inflation target. The staff highlighted the communications challenges that could arise if an inflation range were introduced at a time when inflation had been running below the central bank's objective for a number of years. In this environment, the introduction of a symmetric range around the point objective could be misinterpreted as a sign that the central bank was not concerned about inflation remaining below its stated goal, a situation that could lead to inflation expectations drifting down to the lower end of the range.Participants expressed a range of views on the potential benefits and costs of different types of inflation ranges. Most participants expressed concern that introducing a symmetric inflation range around the 2 percent objective following an extended period of inflation mostly running somewhat below 2 percent could be misperceived as a signal that the Committee was comfortable with continued misses below its symmetric inflation objective. Many participants agreed that an uncertainty range could be misinterpreted as an indifference range and hence as a lack of commitment by the Committee to its symmetric 2 percent inflation objective. Some participants suggested that it was not clear that introducing a range would help much in achieving the Committee's inflation objective; they noted that introducing a range could make that objective less clear to the public. Instead of establishing a range, the Committee could continue to communicate that its inflation objective was symmetric around 2 percent. While inflation is inherently variable, the Committee then could emphasize its intention for inflation to be centered on the 2 percent objective. Nevertheless, in view of the inherent variability of inflation, several participants judged that there could be some benefit in communicating the inflation objective with a symmetric range around the point target. In addition, a few participants suggested that an inflation range could convey the uncertainty associated with the available array of inflation measures or that the Committee's communications could more explicitly reference other measures of inflation. Several participants also stated that employing an asymmetric operational range for a time—with 2 percent being at or near the lower end of that range—while still maintaining the longer-run target of 2 percent could help communicate that the Committee intended inflation to average 2 percent over time, which in turn could help keep longer-run inflation expectations at levels consistent with its objective.Participants expected that, at upcoming meetings, they would continue their deliberations on the Committee's review of monetary policy strategy, tools, and communication practices. Participants continued to anticipate that the review will likely be completed around the middle of this year.Developments in Financial Markets and Open Market Operations The SOMA manager reviewed developments in financial markets over the intermeeting period. For most of the period, risk asset prices rose as market participants focused on a perceived reduction in downside risks to the economic outlook, favorable data on foreign economic activity, and expectations of continued monetary policy accommodation in the United States and other major economies. Some market participants suggested that the Federal Reserve's actions in the fourth quarter to maintain ample reserve levels might have contributed to some degree to the rise in equity and other risk asset prices. Over the final few days of the intermeeting period, financial markets responded to news of the spread of the coronavirus that started in China, which reportedly contributed to downward moves in Treasury yields and, to a lesser extent, U.S. equity prices. On balance, U.S. financial conditions became more accommodative over the intermeeting period, with equity prices rising notably.Despite signs of reduced risks to the outlook and of some stabilization in economic activity abroad, financial market participants' views on the likely course of U.S. monetary policy appeared to have changed little over the intermeeting period. Market-based indicators continued to point to expectations that the target range for the federal funds rate will be lowered by roughly 30 basis points this year. This was consistent with responses to the Open Market Desk's survey, which continued to indicate that, while market participants viewed no change this year in the target range as the most likely outcome, they placed a higher probability on a reduction in the target range over the year than on an increase. Market commentary attributed the stability in federal funds rate expectations despite the perceived reduction in downside risks partly to the Committee's communications; some market participants reportedly regarded those communications as signaling a relatively high bar for changes to the target range. In addition, results from the Desk's surveys suggested that, notwithstanding the abatement in some risks over recent months, many market participants continued to see risks to the economic outlook as skewed to the downside.The manager turned next to a review of money market developments and Desk operations. The federal funds rate was stable over the year-end date and remained close to the interest on excess reserves (IOER) rate. Ongoing reserve management purchases of Treasury bills and the Desk's repurchase agreement (repo) operations kept aggregate reserves above the level that prevailed in early September, contributing to relatively calm money market conditions around year-end. Market participants cited funding from the additional longer-term repo operations spanning year-end and increased capacity in daily operations as helping to maintain stable conditions in short-term funding markets. In addition, market participants prepared earlier than usual for year-end, with borrowers increasing their term borrowing from private lenders and lenders apparently expanding their lending capacity.Since year-end, money market rates remained stable, with the Desk's longer-term repos maturing with no discernible effect on market conditions and reserve management purchases of Treasury bills proceeding smoothly. At the current pace of $60 billion per month, the staff's estimates suggested that after April of this year, the Desk's reserve management purchases will restore the permanent base of reserves to levels above those prevailing in early September 2019. Although reserves are projected to be above $1.5 trillion before April, a surge in the Treasury General Account balance during the April tax season is expected to briefly reduce reserve levels and, in the absence of repo operations, bring reserves down temporarily to around $1.5 trillion.The manager discussed a potential plan for gradually transitioning to an operational approach designed to maintain ample reserve levels without the active use of repo operations to supply reserves. Under this plan, repo operations would be maintained at least through April to ensure ample reserve conditions. However, the Desk would continue the gradual reduction and consolidation of its repo offerings ahead of April, with the plan of phasing out term repo operations after April. As part of this transition, the minimum bid rate on repo operations could be gradually lifted, and the Committee could consider whether there is a role for repo operations in the implementation framework.In the second quarter, the manager expected reserve conditions to support slowing the pace of Treasury bill purchases, with the goal of eventually aligning growth of the Federal Reserve's Treasury holdings with trend growth in its liabilities. As that time approaches, the Committee might wish to consider the appropriate maturity composition of reserve management purchases of Treasury securities. The manager noted that, although the pace of Treasury purchases would likely continue into the second quarter, the rate of expansion in the Federal Reserve's balance sheet would moderate during the first half of 2020 as repo outstanding was gradually reduced.The manager's briefing addressed the possibility of a small technical adjustment to the Federal Reserve's administered rates in light of the stability in money market conditions over recent months. With this adjustment, the Board would lift the interest rates on required and excess reserves by 5 basis points, and the FOMC would implement an equal-sized upward adjustment to the overnight reverse repurchase agreement offer rate. This technical adjustment would reverse the small downward adjustment to administered rates made in September, when money markets were volatile.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The information available for the January 28–29 meeting indicated that labor market conditions remained strong and that real gross domestic product (GDP) increased at a moderate rate in the fourth quarter of 2019. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in November. Survey-based measures of longer-run inflation expectations were little changed.Total nonfarm payroll employment rose in December, and the solid pace of job gains over the second half of 2019 was somewhat above that for the first half. However, the rate of increase in payrolls in 2019 was slower than in 2018, whether or not one accounted for the anticipated effects of the Bureau of Labor Statistics' benchmark revision to payroll employment, which was scheduled for early February. The unemployment rate held steady at its 50‑year low of 3.5 percent in December, and the labor force participation rate and the employment-to-population ratio were unchanged as well. The unemployment rates for African Americans, Asians, Hispanics, and whites were below their levels at the end of the previous economic expansion. Although persistent differentials between these rates remained, they have generally narrowed during the expansion. The average share of workers employed part time for economic reasons in November stayed below its level in late 2007. The rate of private-sector job openings declined, on net, in October and November but was still at a fairly high level; the rate of quits, which was also at a high level, edged up. The four-week moving average of initial claims for unemployment insurance benefits through mid-January remained near historically low levels. Nominal wage growth was moderate, with average hourly earnings for all employees increasing 2.9 percent over the 12 months ending in December.Total consumer prices, as measured by the PCE price index, increased 1.5 percent over the 12 months ending in November. Core PCE price inflation (which excludes changes in consumer food and energy prices) was 1.6 percent over that same 12-month period. Consumer food price inflation was lower than core inflation, and consumer energy prices declined. The trimmed mean measure of 12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas remained at 2 percent in November. The consumer price index (CPI) and the core CPI both rose 2.3 percent over the 12 months ending in December. Recent readings on survey-based measures of longer-run inflation expectations were little changed, on balance, in recent months. The University of Michigan Surveys of Consumers' measure for the next 5 to 10 years moved back up in early January after having fallen to its lowest value on record in December. Meanwhile, the 3-year-ahead measure from the Federal Reserve Bank of New York's Survey of Consumer Expectations remained near its historical low in December.Real PCE appeared to have risen more slowly in the fourth quarter than in the third quarter. Retail sales were soft during the fourth quarter, and sales of light motor vehicles declined in December after a strong gain in November. However, key factors that influence consumer spending—including the low unemployment rate, the upward trend in real disposable income, high levels of households' net worth, and generally low interest rates—remained supportive of solid real PCE growth in the near term. In addition, recent readings on consumer confidence from both the University of Michigan and the Conference Board surveys were strong.Real residential investment appeared to have increased solidly again in the fourth quarter. Starts for single-family homes increased sharply over the November and December period, building permit issuance for such homes rose on net, and starts of multifamily units also moved up. Existing home sales increased, on balance, in November and December, while new home sales declined. All told, the data on residential construction and sales continued to suggest that the decline in mortgage rates since late 2018 had been boosting housing activity.The available data pointed to another decline in real nonresidential private fixed investment in the fourth quarter, with a further contraction in structures investment more than offsetting a modest rise in investment in equipment and intangibles. Nominal shipments and new orders of nondefense capital goods excluding aircraft were little changed in the fourth quarter. Although some measures of business sentiment improved, analysts' expectations of firms' longer-term profit growth edged down further, concerns about trade developments continued to weigh on firms' investment decisions, and reduced deliveries of the Boeing 737 Max were likely restraining investment. Nominal business expenditures for nonresidential structures outside of the drilling and mining sector continued to decline in November. The total number of crude oil and natural gas rigs in operation—an indicator of business spending for structures in the drilling and mining sector—was little changed, on net, through mid-January, though still below levels seen over the latter part of 2019.Industrial production (IP) increased, on net, in November and December, partly because of a pickup in motor vehicle production following the strike at General Motors. Even so, IP was lower than a year earlier, with declines in manufacturing production and the output of utilities only partly offset by an increase in mining output. Automakers' schedules suggested that assemblies of light motor vehicles would increase in the first quarter, but that gain appeared likely to be offset by Boeing's curtailed production of the 737 Max aircraft and, more generally, by mixed readings on new orders from national and regional manufacturing surveys.Total real government purchases appeared to have increased moderately in the fourth quarter. Nominal defense spending in November and December pointed to only a moderate rise in real federal government purchases. Real purchases by state and local governments looked to have risen a little faster than in the third quarter; nominal construction spending by these governments increased solidly in November, and state and local payrolls expanded modestly in December.Real net exports were estimated to have provided a substantial boost to real GDP growth in the fourth quarter. Available monthly data suggested that imports fell significantly, led by declines in consumer goods and automobiles, while exports were about flat.Incoming data suggested that foreign economic growth slowed further in the fourth quarter to a very subdued pace. In the advanced foreign economies (AFEs), growth appeared to have remained weak as the manufacturing slump continued and a consumption tax hike in Japan led to a sharp contraction in household spending. In the emerging economies, social unrest weighed heavily on economic activity in Hong Kong and Chile, while the labor strike at General Motors was a further drag on Mexico's already weak economy. In contrast, early GDP releases showed a pickup in growth in China and some other Asian economies, though news of the coronavirus outbreak raised questions about the sustainability of that pickup. Foreign inflation rose in the wake of temporary factors in India and China, while it remained soft in most AFEs, in part reflecting previous declines in energy prices and muted core inflation pressures.Staff Review of the Financial Situation Investor sentiment improved, on balance, over the intermeeting period, mostly reflecting progress related to the phase-one trade deal between the United States and China and its subsequent signing, the perception that the probability of a disorderly Brexit had declined, signs of stabilization in the global economic outlook, and, reportedly, continued confidence that monetary policy in the United States and other major economies would remain accommodative in the near term. Late in the period, concerns about the spread of the coronavirus and uncertainty about its potential economic effect weighed negatively on investor sentiment and led to moderate declines in the prices of risky assets. On net, equity prices increased notably over the intermeeting period, while corporate bond spreads were little changed and yields on nominal Treasury securities declined. Financing conditions for businesses and households eased a bit further and generally remained supportive of spending and economic activity.Federal Reserve communications over the intermeeting period reportedly reinforced investors' beliefs that a near-term change to the target range for the federal funds rate was unlikely. Consistent with those reports, a straight read of the probability distributions for the federal funds rate implied by options prices suggested that investors assigned a high probability to the target range remaining unchanged over the next few months. Expectations for the federal funds rate at the end of 2020, as implied by overnight index swap quotes, moved down slightly, on net, and implied about a 30 basis point decline in the federal funds rate from its current level.Yields on nominal Treasury securities declined, on net, across the maturity spectrum over the intermeeting period, while the spread between the yields on nominal 10‑ and 2-year Treasury securities was little changed. Measures of inflation compensation over the next 5 years and 5 to 10 years ahead based on Treasury Inflation-Protected Securities decreased, on net, but remained above their October 2019 lows.Broad stock price indexes increased notably, on balance, over the intermeeting period, with gains largely attributed to improved market sentiment about trade negotiations and a perceived lower probability of a disorderly Brexit. Late in the period, equity prices retraced some of their gains, as concerns about the spread of the coronavirus weighed negatively on risk sentiment. Overall movements in stock prices varied widely across economic sectors, with stocks of firms in the information technology and utilities sectors significantly outperforming aggregate indexes, while stock prices of firms in the energy sector declined markedly. Option-implied volatility on the S&P 500 index increased a bit, on balance, while corporate credit spreads were little changed.Conditions in domestic short-term funding markets, including in secured financing, were stable over the intermeeting period, even over year-end. Rates declined slightly, likely reflecting increased liquidity and a higher level of reserves provided by the Desk's open market operations. The effective federal funds rate remained close to the IOER rate, and spreads for term unsecured commercial paper and negotiable certificates of deposit narrowed substantially, particularly after year-end. The Desk's open market operations proceeded smoothly.For most of the intermeeting period, foreign equity prices rose amid progress on U.S.–China trade negotiations, generally favorable data on global economic activity, and the reduced risk of a disorderly Brexit following the U.K. general election. Late in the period, however, concerns about the coronavirus outbreak in China weighed on risk sentiment. On balance, most major foreign equity indexes increased modestly, and AFE long-term sovereign yields ended the period somewhat lower. U.K. and Canadian yields declined more than elsewhere against the backdrop of central bank communications that were interpreted as increasing the likelihood of policy easing in those countries.The broad dollar index weakened slightly over the period, predominantly against emerging market currencies. The Chinese renminbi appreciated notably against the dollar on positive trade policy developments, but this gain was more than undone late in the period by concerns about the coronavirus. The Mexican peso strengthened against the dollar, supported by progress on the U.S.-Mexico-Canada Agreement (USMCA) and Bank of Mexico communications that were perceived as less accommodative than expected.Financing conditions for nonfinancial firms remained accommodative, on balance, with corporate borrowing costs staying near historical lows during the intermeeting period. Gross issuance of investment-grade corporate bonds was subdued in January and December after surging in November. Issuance of speculative-grade bonds over the intermeeting period remained about in line with the average pace over December and January in recent years. Institutional leveraged loan issuance continued to be robust in December, reflecting solid refinancing activity and moderate new money issuance. Meanwhile, commercial and industrial (C&I) loans on banks' balance sheets contracted in the fourth quarter. Respondents to the January 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) reported that borrower demand weakened for C&I loans over the fourth quarter, and lending standards on such loans were little changed. Gross equity issuance through seasoned offerings remained robust in December, while initial public offerings continued to be quite light. The credit quality of nonfinancial corporations and the earnings outlook remained generally stable in recent months. Credit conditions for both small businesses and municipalities remained accommodative on net.In the commercial real estate (CRE) sector, financing conditions also remained generally accommodative. The volume of agency and non-agency commercial mortgage-backed securities issuance grew notably in the fourth quarter, buoyed by lower interest rates, and the growth of CRE loans on banks' books picked up over this period. Responses to the January 2020 SLOOS suggested that lending standards and demand for most CRE loan categories were unchanged in the fourth quarter.Financing conditions in the residential mortgage market remained accommodative on balance. Mortgage rates decreased notably during the intermeeting period, reaching recent-year lows. Home-purchase originations remained around post-crisis highs, and mortgage refinancing activity continued at a strong pace through December.Financing conditions in consumer credit markets remained supportive of growth in consumer spending, although the supply of credit remained relatively tight for nonprime borrowers. The growth of credit card balances slowed in the fourth quarter, and, according to the January SLOOS, commercial banks tightened their standards on credit card loans over this period. Auto loan growth maintained a solid pace in recent months amid declining interest rates through year-end.The staff provided an update on its assessments of potential risks to financial stability. On balance, the financial vulnerabilities of the U.S. financial system were characterized as moderate. The staff judged that asset valuation pressures had increased in recent months to an elevated level. Asset valuation pressures were characterized as fairly widespread across a number of markets, similar to the situation in much of 2017 and 2018. In assessing vulnerabilities stemming from borrowing in the household and business sectors, the staff noted that, while the ratio of household debt to nominal GDP was fairly low, the ratio of business debt to nominal GDP was high by historical standards. At the same time, major financial institutions were viewed as resilient, in part because of high levels of capital at banks. Nonetheless, the staff noted that banks had announced that they intend to allow their capital ratios to decline closer to regulatory requirements over the medium term. Vulnerabilities stemming from funding risk were characterized as moderate. While the money market strains in September raised some questions about vulnerabilities in funding markets, the staff assessed that the core of the financial system remains resilient to vulnerabilities from maturity and liquidity transformation.Staff Economic Outlook The projection for U.S. real GDP growth prepared by the staff for the January FOMC meeting was stronger than in the previous forecast. Data pertaining to the fourth quarter of 2019, particularly on imports, suggested output rose faster at the end of the year than was previously projected, and this faster pace seemed consistent with the solid employment gains in the fourth quarter. In addition, more supportive financial conditions and the anticipated effects of the phase-one trade deal between the United States and China pushed up the staff's GDP forecast for this year and next. All told, real GDP growth was projected to be about the same in 2020 as in 2019 and then to slow modestly in the coming years, partly because of a fading boost from fiscal policy. Output was forecast to expand at a rate a little above the staff's estimate of its potential rate of growth in 2020 and 2021 and then to slow to a pace slightly below potential output growth in 2022. The unemployment rate was projected to decline a little further this year and to remain at that lower level through 2022; the unemployment rate was anticipated to be below the staff's estimate of its longer-run natural rate throughout the forecast period.The staff's forecasts for both total and core PCE price inflation over the 2020–22 period were essentially unrevised. Core inflation was still projected to step up a little in 2020 but to run a bit below 2 percent both this year and over the next two years. Total PCE price inflation was projected to be a little lower than core inflation in 2020 because of a projected decline in consumer energy prices and to be the same as core inflation in 2021 and 2022.The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as generally similar to the average of the past 20 years. The staff viewed the downside risks to economic activity as having diminished a bit further since the previous forecast but still judged that the risks to the forecast for real GDP growth were tilted to the downside, with a corresponding skew to the upside for the unemployment rate. Important factors influencing this assessment were that foreign economic and geopolitical developments still seemed more likely to move in directions that could have significant negative effects on the U.S. economy than to resolve more favorably than assumed. In addition, softness in business investment and manufacturing production last year, as well as the recent weakness in imports, was seen as pointing to the possibility of a more substantial slowing in economic growth than the staff projected. The risks to the inflation projection were also viewed as having a downward skew, in part because of the downside risks to the forecast for economic activity.Participants' Views on Current Conditions and the Economic Outlook Participants agreed that the labor market had remained strong over the intermeeting period and that economic activity had risen at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had risen at a moderate pace, business fixed investment and exports had remained weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy were running below 2 percent. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations were little changed.Participants generally judged that the current stance of monetary policy was appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. They expected economic growth to continue at a moderate pace, supported by accommodative monetary and financial conditions. In addition, some trade uncertainties had diminished recently, and there were some signs of stabilization in global growth. Nonetheless, uncertainties about the outlook remained, including those posed by the outbreak of the coronavirus.In their discussion of the household sector, participants noted that spending growth had moderated in the fourth quarter. However, they generally expected that, in the period ahead, consumption spending would likely remain on a firm footing, supported by strong labor market conditions, rising incomes, and healthy household balance sheets. Some participants noted the upbeat tone of consumer surveys, and a few commented that their District contacts had reported solid retail sales during the holiday shopping season. In addition, many participants were encouraged by the significant pickup since last summer in residential investment, a development that reflected, in part, the effects of lower mortgage rates.With respect to the business sector, participants observed that business investment and exports remained weak and that manufacturing output had declined over the past year. Looking ahead, participants were generally cautiously optimistic about the effects on the business sector of the recent favorable trade developments and the signs of stabilization in global growth. Many participants expressed the view that these developments might boost business confidence or raise export demand, which would help strengthen or at least stabilize business investment. A few participants remarked that contacts in their Districts had noted that business sentiment was brighter or that companies were intending to expand their capital expenditures this year. Several other participants, however, judged that the effect of the recent trade agreement with China would be relatively limited, as trade uncertainty would likely remain elevated, with the possibility remaining of the emergence of new tensions as well as the reescalation of existing tensions. They noted that the agreement would still leave a large portion of tariffs in place and that many firms had already been making production and supply chain adjustments in response to trade tensions.Participants also commented on ongoing challenges facing the energy and agriculture sectors. A couple of participants remarked that activity in the energy sector continued to be weak, and a few noted that financial conditions in the agricultural sector would likely remain challenging for many despite farm subsidies from the federal government and recent optimism surrounding trade prospects.Participants judged that conditions in the labor market remained strong, with the unemployment rate at a 50‑year low and continued solid job gains, on average. Although the upcoming annual benchmark revision was expected to reduce estimates of recent payroll growth, participants expected payroll employment to expand at a healthy pace this year. Business contacts in many Districts indicated continued strong labor demand, with several participants mentioning that contacts reported difficulties in finding qualified workers or that observed wage growth might currently understate the degree of tightness in the labor market. However, a number of participants indicated that aggregate measures of nominal wages continued to rise at a moderate pace broadly in line with productivity growth and the rate of inflation. Several participants commented on potential reasons for the absence of stronger broad-based wage pressures, including technological changes that could substitute for labor, increased willingness of employees to forgo wage gains for greater job stability, adjustments in nonwage portions of compensation packages, and the possibility that the labor market was not as tight as the historically low unemployment rate would suggest. Many participants pointed to the strong performance of labor force participation despite the downward pressures associated with an aging population, and several raised the possibility that there was some room for labor force participation to rise further.In their discussion of inflation developments, participants noted that recent readings on overall and core PCE price inflation, measured on a 12-month basis, had continued to run below 2 percent. Overall, participants described their inflation outlook as having changed little since December. Participants generally expected inflation to move closer to 2 percent in the coming months as the unusually low readings in early 2019 drop out of the 12-month calculation. Participants also expected that, as the economic expansion continues and resource utilization remains high, inflation would return to the 2 percent objective on a sustainable basis. A few participants expressed less confidence in this outlook for inflation and commented that inflation had averaged less than 2 percent over the past several years even as resource utilization had increased, or pointed to downward pressures from global or technology-related factors that could continue to suppress inflation. A couple of participants, however, noted that some alternative inflation indicators, including trimmed mean measures, suggested that there had been a modest step-up in underlying inflation during 2019 or that underlying inflation could already be at a level consistent with the Committee's goal.Participants generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting, although a number of downside risks remained prominent. The easing of trade tensions resulting from the recent agreement with China and the passage of the USMCA as well as tentative signs of stabilization in global economic growth helped reduce downside risks and appeared to buoy business sentiment. The risk of a "hard" Brexit had appeared to recede further. In addition, statistical models designed to estimate the probability of recession using financial market data suggested that the likelihood of a recession occurring over the next year had fallen notably in recent months. Still, participants generally expected trade-related uncertainty to remain somewhat elevated, and they were mindful of the possibility that the tentative signs of stabilization in global growth could fade. Geopolitical risks, especially in connection with the Middle East, remained. The threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching.In their discussion of financial stability, participants acknowledged the staff report suggesting that overall financial vulnerabilities remained moderate and that the financial system remained resilient. Nonetheless, several participants observed that equity, corporate debt, and CRE valuations were elevated and drew attention to high levels of corporate indebtedness and weak underwriting standards in leveraged loan markets. Some participants expressed the concern that financial imbalances—including overvaluation and excessive indebtedness—could amplify an adverse shock to the economy, that the current conditions of low interest rates and labor market tightness could increase risks to financial stability, or that cyber attacks could affect the U.S. financial system. Several participants noted that planned increases in dividend payouts by large banks and the associated decline in capital buffers might leave those banks with less capacity to weather adverse shocks—which could have negative implications for the economy—or that lower bank capital ratios could be associated with greater tail risks to GDP growth. On the other hand, capital levels at U.S. banks were quite high relative to other sectors of the financial system, raising questions about the potential migration of lending activities away from the U.S. banking sector to areas outside the oversight of federal banking supervisors.In their consideration of monetary policy at this meeting, participants judged that it would be appropriate to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. With regard to monetary policy beyond this meeting, participants viewed the current stance of policy as likely to remain appropriate for a time, provided that incoming information about the economy remained broadly consistent with this economic outlook. Of course, if developments emerged that led to a material reassessment of the outlook, an adjustment to the stance of monetary policy would be appropriate, in order to foster achievement of the Committee's dual-mandate objectives.In commenting on the monetary policy outlook, participants concurred that maintaining the current stance of policy would give the Committee time for a fuller assessment of the ongoing effects on economic activity of last year's shift to a more accommodative policy stance and would also allow policymakers to accumulate further information bearing on the economic outlook. Participants discussed how maintaining the current policy stance for a time could be helpful in supporting U.S. economic activity and employment in the face of global developments that have been weighing on spending decisions.With regard to the Committee's price-stability objective, participants observed that the current degree of monetary policy accommodation would be useful in facilitating a return of inflation to 2 percent. Several participants noted that inflation returning to 2 percent would help ensure that longer-term inflation expectations remained consistent with the Committee's longer-run inflation objective. A few participants stressed that the Committee should be more explicit about the need to achieve its inflation goal on a sustained basis. Several participants suggested that inflation modestly exceeding 2 percent for a period would be consistent with the achievement of the Committee's longer-run inflation objective and that such mild overshooting might underscore the symmetry of that objective. With regard to the Committee's maximum employment objective, a few participants observed that the actual level of employment might still be below maximum employment and that maintaining the present monetary policy stance would allow the economy to achieve that maximum level. A couple of other participants expressed concern that tight labor markets have in the past been associated with economic and financial imbalances and that the emergence of such imbalances might jeopardize the longer-run attainment of the Committee's dual-mandate goals.Participants discussed the open market operations that the Federal Reserve had undertaken since September to implement monetary policy, as well as forthcoming operational measures. Participants agreed that the operations undertaken by the Desk since mid-September had been effective in helping to stabilize conditions in money markets and that implementation of the plan that the Committee announced in October to purchase Treasury bills and conduct repo operations had proceeded smoothly. Participants observed that enactment of this plan had succeeded in replenishing reserve balances to levels at or above those prevailing in early September 2019 and in ensuring continued control of the federal funds rate. Many participants stressed that, as reserves approached durably ample levels, the need for sizable Treasury bill purchases and repo operations would diminish and that such operations could be gradually scaled back or phased out. Beyond that point, regular open market operations would be required over time in order to accommodate the trend growth in the Federal Reserve's liabilities and maintain an ample level of reserves. Participants who commented on the Desk's proposal for the transition to the ample-reserves regime indicated that they were comfortable with that proposal. They remarked that the details of the Committee's plans would be adjusted as appropriate to support effective implementation of monetary policy. Participants noted that it would be important to continue to communicate to the public that open market operations now and in the period ahead were technical operations aimed at achieving and maintaining ample reserves and that any adjustments to those operations were not intended to represent a change in the stance of monetary policy. Several participants suggested that the Committee should resume before long its discussion of the role that repo operations might play in an ample-reserves regime, including the possible creation of a standing repo facility. A couple of these participants cited the potential for such a facility to reduce the banking system's demand for reserves over the longer term.Committee Policy Action In their discussion of monetary policy for this meeting, members noted that information received since the FOMC met in December indicated that the labor market remained strong and that economic activity had been rising at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had been rising at a moderate pace, business fixed investment and exports remained weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy were running below 2 percent. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations were little changed.Members agreed to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. Members judged that the current stance of monetary policy was appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.Members also agreed that, in determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee would assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. And they concurred that this assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.With regard to the postmeeting statement, members agreed that incoming data warranted a change in the statement's description of recent rises in household spending from "strong" to "moderate." They also agreed to describe the current monetary policy stance as consistent with inflation "returning to," rather than being "near," their symmetric 2 percent longer-run objective. In commenting on this change in wording, a few members noted that the new language would make the postmeeting statement more consistent with the Committee's outlook or might usefully affirm the symmetry of the Committee's inflation goal and indicate that policymakers were not satisfied with inflation outcomes that were persistently below 2 percent.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective January 30, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1-1/2 to 1-3/4 percent. In light of recent and expected increases in the Federal Reserve's non-reserve liabilities, the Committee directs the Desk to continue purchasing Treasury bills at least into the second quarter of 2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations at least through April 2020 to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation. In addition, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.50 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.The Committee directs the Desk to continue rolling over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and to continue reinvesting all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month. Principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20 billion per month will continue to be reinvested in agency mortgage-backed securities. Small deviations from these amounts for operational reasons are acceptable.The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions."The vote also encompassed approval of the statement below for release at 2:00 p.m.:"Information received since the Federal Open Market Committee met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Patrick Harker, Robert S. Kaplan, Neel Kashkari, Loretta J. Mester, and Randal K. Quarles.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to raise the interest rates on required and excess reserve balances to 1.60 percent. Setting the interest rate paid on required and excess reserve balances 10 basis points above the bottom of the target range for the federal funds rate is intended to foster trading in the federal funds market at rates well within the FOMC's target range. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 2.25 percent, effective January 30, 2020.It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, March 17-18, 2020. The meeting adjourned at 9:50 a.m. on January 29, 2020.Notation Vote By notation vote completed on January 2, 2020, the Committee unanimously approved the minutes of the Committee meeting held on December 10-11, 2019._______________________James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended Tuesday's session only. Return to text3. Attended through the discussion of the review of the monetary policy framework. Return to text4. Attended through the discussion of developments in financial markets and open market operations. Return to text5. Attended the discussion of developments in financial markets and open market operations. Return to text6. Attended the discussion of economic developments and the outlook. Return to text7. Committee organizational documents are available at https://www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. Return to text1. In general, as specified in Article IV, each member of the IMF undertakes to collaborate with the IMF and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. These obligations include seeking to direct the member's economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability. These obligations also include avoiding manipulating exchange rates or the international monetary system in such a way that would impede effective balance of payments adjustment or to give an unfair competitive advantage over other members. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2020 01 29WASHINGTON — The Financial Crimes Enforcement Network (FinCEN) will host a special virtual FinCEN Innovation Hours Program on September 9, 2021, focusing on the important role of privacy-preserving principles in developing technical solutions that enhance financial services innovation while countering illicit activity and national security risks that undermine the integrity and opportunity of the U.S. financial system. FinCEN encourages participation by companies developing solutions to privacy issues, such as homomorphic encryption, zero-knowledge proofs, and other technology that balances privacy and financial integrity. This could include FinTech companies, RegTech companies, venture capital firms, and financial institutions. FinCEN requests that demonstrations highlight how the innovative solutions work and how financial institutions or business and retail consumers might use them, or how they may support private- and public-sector efforts to enhance our financial integrity, while protecting national security and personal privacy. Each meeting will last no longer than an hour.“This program is an example of FinCEN’s ongoing dedication to advancing the integrity and innovative strength of the U.S. financial system, which includes balancing transparency and accountability with the important principles of privacy and security,” said Acting Director Michael Mosier. “We support responsible innovation, especially that which promotes the resilience and safety of our financial system and the American people."Interested companies should submit a request online no later than July 23, 2021, and provide applicable background information about their firm’s business and innovative products. The number of individual demonstration sessions will depend on available time and the number of participants. FinCEN announced the monthly Innovation Hours Program in May 2019. The Innovation Hours Program is part of a broader FinCEN Innovation Initiative, which seeks to promote innovation by supporting, where appropriate and feasible, innovative pilot programs, and enhanced feedback and information sharing programs.
drag me to text box!FinCEN to Host Innovation Hours Program Workshop on Privacy Enhancing TechnologiesWASHINGTON — The Financial Crimes Enforcement Network (FinCEN) will host a special virtual FinCEN Innovation Hours Program on September 9, 2021, focusing on the important role of privacy-preserving principles in developing technical solutions that enhance financial services innovation while countering illicit activity and national security risks that undermine the integrity and opportunity of the U.S. financial system. FinCEN encourages participation by companies developing solutions to privacy issues, such as homomorphic encryption, zero-knowledge proofs, and other technology that balances privacy and financial integrity. This could include FinTech companies, RegTech companies, venture capital firms, and financial institutions. FinCEN requests that demonstrations highlight how the innovative solutions work and how financial institutions or business and retail consumers might use them, or how they may support private- and public-sector efforts to enhance our financial integrity, while protecting national security and personal privacy. Each meeting will last no longer than an hour.“This program is an example of FinCEN’s ongoing dedication to advancing the integrity and innovative strength of the U.S. financial system, which includes balancing transparency and accountability with the important principles of privacy and security,” said Acting Director Michael Mosier. “We support responsible innovation, especially that which promotes the resilience and safety of our financial system and the American people."Interested companies should submit a request online no later than July 23, 2021, and provide applicable background information about their firm’s business and innovative products. The number of individual demonstration sessions will depend on available time and the number of participants. FinCEN announced the monthly Innovation Hours Program in May 2019. The Innovation Hours Program is part of a broader FinCEN Innovation Initiative, which seeks to promote innovation by supporting, where appropriate and feasible, innovative pilot programs, and enhanced feedback and information sharing programs.
drag me to text box!FinCEN to Host Innovation Hours Program Workshop on Privacy Enhancing TechnologiesThe Financial Crimes Enforcement Network (FinCEN) is extending the deadline for its special monthly virtual FinCEN Innovation Hours Program on June 10, 2021, which will focus on the important role of underserved groups in developing technology to fight illicit financial activity and protect the nation’s security. FinCEN encourages participation by financial technology (FinTech) and regulatory technology (RegTech) companies, venture capital and investment firms, and financial institutions majority founded, owned, or managed by underserved groups. This event will highlight the important contributions that underserved groups provide to responsible innovation efforts and will ensure that FinCEN learns from an increasingly diverse audience. Interested companies should submit a request online no later than May 24, 2021, and provide applicable background information about their firm’s business and innovative products. Only firms listed under the Small Business Administration’s Certification Program (8a, Woman-owned, Economically Disadvantaged) in the Dynamic Small Business Search (DSBS) will be considered for participation in the demonstration sessions.
drag me to text box!FinCEN Extends Application Deadline for Special Monthly Innovation Hours Sessions for Underserved Groups Developing Technology to Fight Illicit Financial Activity