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In the run up to Christmas, 5,000 fuel tanker, lorry drivers and poultry workers will be allowed into the UK for three months, in an effort to provide short-term relief to the industry, with visas valid until 24 December, the government says.Saturday 25 September 2021 23:25, UKUp to 4,000 people will be trained up as new HGV drivers and short-term visas will be offered for foreign hauliers, as part of a package of measures that will help tackle the driver shortage, the government has announced.The government is looking to ease the pressures currently faced by the supply chain, which has seen people queueing for petrol and shops struggle to fill their shelves around the country.The Department for Education says it is investing up to £10m for new, free "skills bootcamps", which will train 3,000 people to drive lorries in short, intensive courses.Please use Chrome browser for a more accessible video playerA further 1,000 people will be trained through local courses that have been funded centrally by the adult education budget, the department says.It will be supported by the Ministry of Defence, which will deploy driving test examiners to help increase testing capacity over the next three months.In the run up to Christmas, 5,000 fuel tanker and food lorry drivers will be allowed into the UK for three months, in an effort to provide short-term relief to the industry, with visas valid until 24 December. Some 5,000 poultry workers will also be allowed into the UK on the same terms. Supply crisis: 'Catastrophic' panic buying of fuel 'going to get worse', says industry expert Petrol driver shortage: Situation 'will get worse before it gets better'; police urge drivers to be 'sensible' at pumps; bust-up at busy petrol station Supply crisis: Why is there a HGV driver shortage and how bad could the problem get? To show its appreciation for working during a time of increased pressures, the Department for Transport will send letters to nearly one million HGV drivers, thanking them for their work and setting out how it will be trying to improve the industry.Transport Secretary Grant Shapps said: "This package of measures builds on the important work we have already done to ease this global crisis in the UK, and this government continues to do everything we can to help the haulage and food industries contend with the HGV driver shortage."We are acting now but the industries must also play their part with working conditions continuing to improve and the deserved salary increases continuing to be maintained in order for companies to retain new drivers."After a very difficult 18 months, I know how important this Christmas is for all of us and that's why we're taking these steps at the earliest opportunity to ensure preparations remain on track." The country is estimated as needing 100,000 more HGV drivers if it is to meet demand, according to the Road Haulage Association (RHA).Rod McKenzie, from the organisation, told Sky News it is a "critical situation" and a "cocktail of chaos" had led to the crisis.The pandemic has seen many foreign HGV drivers return to their home countries and the "vast majority" have not returned, according to the RHA.It added that the "uncertainty of Brexit and future rights to live and work in the UK" forced many drivers to leave the country. © 2021 Sky UK

Problems with some fuel deliveries have sparked long queues at petrol stations, while retailers have warned a solution to the HGV driver shortage must be found within days to avoid "significant disruption" in the run-up to Christmas. News reporter @DavidMercerSky Saturday 25 September 2021 23:22, UKPanicked motorists have caused lengthy queues at petrol stations and caused some pumps to run dry - the latest consequence of a shortage of HGV drivers which is causing widespread disruption in the UK.The government insists the country has "ample fuel stocks" but it has not stopped long lines of cars forming after some forecourts were affected by problems getting petrol deliveries.It comes after the UK's biggest supermarket chains and restaurants including McDonald's, KFC and Nando's, were impacted by the truck driver shortages.Fuel supply latest: Follow live updates as police urge motorists to 'be sensible'Please use Chrome browser for a more accessible video playerRetailers have now warned a solution must be found within days to avoid "significant disruption" in the run-up to Christmas.So why is there a HGV driver shortage, how big is the problem and what can be done to fix it?• Why is there a shortage of HGV drivers?The UK needs 100,000 more HGV drivers if it is to meet demand, according to the Road Haulage Association (RHA).Rod McKenzie, from the organisation, told Sky News it is a "critical situation" and a "cocktail of chaos" had led to the crisis.So what are the causes?Please use Chrome browser for a more accessible video playerCOVID pandemicThe coronavirus pandemic has seen many foreign HGV drivers return to their home countries and the "vast majority" have not returned, according to the RHA.There has also been a large backlog in HGV driver tests due to the pandemic, meaning tens of thousands of potential new drivers have been unable to join the industry.Last year, 40,000 tests were cancelled - with 25,000 fewer candidates passing their test in 2020 than in 2019.BrexitThe RHA claims around 20,000 European drivers have left the UK for "Brexit reasons".It says the "uncertainty of Brexit and future rights to live and work in the UK" forced many drivers to leave the country. However Transport Secretary Grant Shapps claims Brexit has helped provide solutions to the shortages in the haulage sector by allowing an increase in HGV driving tests to be introduced.Please use Chrome browser for a more accessible video playerHe told Sky News: "I've seen people point to Brexit as if it is the culprit here. In fact, they are wrong."Labour Party chair Anneliese Dodds said the government's handling of Brexit had been partly to blame for adding extra pressure on the HGV sector.She told Sky News that manufacturers now faced "additional red tape" and drivers were having to fill in "dozens of pages of paperwork"."That is quite a tall order for a HGV driver if they have got to be dealing with all of that, as well as getting goods from one place to another," she added. Retiring driversThe average age of an HGV driver is 55, while less than 1% of drivers are under the age of 25, according to the RHA.It says around 2,000 drivers are leaving the industry every week, often due to retirement, with only 1,000 new recruits joining over the same period.Mr McKenzie told Sky News: "We've got an ageing population of lorry drivers so we've got more lorry drivers leaving the profession because they want to retire."We've got more drivers leaving than joining so as every week goes by so there's something new in the supply chain that's creaking and crumbling."Cost of training and payMr McKenzie said the industry "needs to make the profession of a trucker much more enticing" to younger people and warned the cost of training was a deterrent."We want younger people to want to be truckers, and it's expensive - at least £4,000, possibly £7,000 - to train to be a trucker and that's beyond the pockets of most young people," he told Sky News."So we've got to make it easier to take that financial burden away from them and make it easier for them to get in and stay in."One of the problems we've had has been low pay and that's now being addressed."We're seeing in many cases trucker pay has risen quite dramatically to around £40,000-£50,000 a year, which is very welcome."Tax changes A change to rules on how people working off the payroll pay tax has been blamed for some HGV drivers leaving the industry.The reform of the IR35 rules were designed to prevent workers from setting up limited companies through which they pay less tax and National Insurance while working, in effect, as an employee.Victoria Short, chief executive of Randstad UK Recruitment, told Sky News it had resulted in many HGV drivers moving from self-employed status to employed status, which saw their earnings drop by as much as 25%.Working conditionsConditions at roadside services in the UK are "far worse" than in mainland Europe, according to Ms Short.She said: "When we're trying to attract talent from mainland Europe to come here and work, and the pay and conditions that they have there are better, we need to consider how we can looks at things like that for them as well."Please use Chrome browser for a more accessible video player• What is being done to fix the problem?Temporary visasThe government is expected to clear the way for a visa change allowing thousands of foreign lorry drivers to work in the UK.The temporary measures would be aimed at HGV truckers from abroad plugging the gaps that have been blamed for causing the queues at petrol pumps and shortages in some food items.Number 10 has insisted any move would be "very strictly time-limited" and Sky News understands that Boris Johnson has allowed ministers to relax immigration rules and issue visas that could allow up to 5,000 foreign lorry drivers to work in the UK.But Mr McKenzie said the temporary visas "won't solve" the problems facing the haulage industry, adding that "much more needs to be done on training, apprenticeships, testing and welfare facilities for truckers".Retailers Iceland, Morrisons and Ocado have called for the government to add HGV drivers to the list of shortage occupations.That would allow foreign workers to apply for skilled worker visas to fill the current gaps.HGV driving tests relaxedThe transport secretary announced earlier this month that HGV driving tests will be relaxed to allow 50,000 more to be taken in an attempt to tackle the shortage of lorry drivers ahead of Christmas.Mr Shapps said three changes will happen to speed up the process after the suspension of tests during the COVID-19 pandemic.The changes are:• From 20 September, car drivers will not be able to take a test to tow a trailer or caravan to allow about 30,000 more HGV driving tests to be taken this year• Tests will be made shorter, with the reversing exercise element removed and the uncoupling and recoupling exercise for trailer tests removed - and they will not have to be tested separately by a third party• Articulated vehicle drivers will no longer have to get a licence for a smaller vehicle first. The government says this will allow about 20,000 more HGV tests each year and means drivers can gain licences and enter the industry more quickly.Military support?There have been reports that the government is set to call on HGV specialists from the military, including the Royal Logistics Corps, in an effort to tackle a deteriorating backlog of goods.But Richard Burnett, who heads the RHA, told Sky News that deploying army personnel to help tackle the HGV driver shortage "will not scratch the surface" of the UK's delivery crisis. © 2021 Sky UK

Long lines of cars continue to form at petrol stations across the country on Saturday after a shortage of HGV drivers forced some fuel retailers to shut their pumps and ration sales. News reporter @DavidMercerSky Saturday 25 September 2021 23:24, UKPlease use Chrome browser for a more accessible video playerPanicked motorists have caused lengthy queues at petrol stations for a second day - as an industry expert predicted the "catastrophic situation" is going to get worse before it improves.Long lines of cars continued to form at forecourts across the country on Saturday after a shortage of HGV drivers forced some fuel retailers to shut their pumps and ration sales.The petrol problems come after retailers warned a solution to the lack of truckers must be found within days to avoid "significant disruption" in the run-up to Christmas.Fuel supply latest: Follow live updates as police urge motorists to 'be sensible'Sky News understands that Boris Johnson has allowed minsters to relax immigration rules and up to 5,000 temporary visas could be issued to foreign lorry drivers.Brian Madderson, chairman of the Petrol Retailers Association, described the panic buying as a "catastrophic situation" and said he had witnessed queues up to a mile long at forecourts. Supply crisis: Up to 4,000 to train as new HGV drivers to help tackle shortage, government says Petrol driver shortage: Situation 'will get worse before it gets better'; police urge drivers to be 'sensible' at pumps; bust-up at busy petrol station Supply crisis: Why is there a HGV driver shortage and how bad could the problem get? He told Sky News: "There's enough fuel at the refineries and terminals to supply the normal demand."What we have at the moment is abnormal demand where everyone is rushing to fill up their vehicles."He added: "It is a crisis situation that has developed very quickly." Mr Madderson warned that the panic buying of fuel risked impacting key workers trying to get to work."I think this situation is going to get worse before it gets better," he added.Brian Madderson, the chairman of the Petrol Retailers Association, says he believes "this situation is going to get worse before it gets better"Read the latest on the petrol driver shortage: https://t.co/ZTEwFqbFXE pic.twitter.com/WdXSe16ii3An announcement on the temporary visa scheme aimed at HGV drivers is expected this weekend, with Number 10 insisting any move would be "very strictly time-limited".The UK is facing a shortage of 100,000 HGV drivers, according to the Road Haulage Association.A Downing Street spokesperson said the country had "ample fuel stocks" and insisted "there are no shortages".Please use Chrome browser for a more accessible video playerBut Labour's deputy leader Angela Rayner criticised the government for the "crisis now on our forecourts".She told Sky News: "People have started to panic buy fuel and I would urge people not to do that because that will only make the situation worse."But this is of the government's own doing and their failures."She added: "It's a theme that we have with this government - they constantly do things at the last minute, at the last possible point, and create the crisis in the first place."Once again Boris Johnson and his government have basically decided to have a laissez-faire attitude and hope that things will just fix themselves."Well, they haven't fixed themselves and their policies have come home to roost for the British public." People have been spotted filling up jerry cans with petrol in pictures being circulated on social media.Lincolnshire Police urged drivers to be "sensible" about filling up at petrol stations after long queues for the pumps built up around the region.Esso, BP and Tesco forecourts have been affected by problems getting petrol deliveries.Please use Chrome browser for a more accessible video playerBP said around 20 of its 1,200 petrol forecourts were closed due to a lack of available fuel, with between 50 and 100 sites affected by the loss of at least one grade of fuel.A "small number" of Tesco refilling stations have also been impacted, said Esso owner ExxonMobil, which runs the sites.On Friday, the EG Group, which has around 400 petrol stations in the UK, said it was imposing a £30 limit "due to the current unprecedented customer demand for fuel". © 2021 Sky UK

Saturday 25 September 2021 23:26, UKAnthony Joshua has failed to retain his heavyweight titles after being beaten by Oleksandr Usyk.Ukrainian Usyk won on a points decision after 12 rounds at the Tottenham Hotspur Stadium in north London, meaning he takes Joshua's IBF, WBA and WBO belts.The 34-year-old became the third man, after Evander Holyfield and David Haye, to win world titles at cruiserweight then heavyweight.Joshua finished the bout slumped against the ropes as his smaller foe handed him just the second defeat of his career in front of more than 60,000 boxing fans.Speaking to Sky Sports Box Office, Usyk said: "This means a lot for me. The fight went the way I expected it to go. There were moments when Anthony pushed me hard but it was nothing special."I had no objective to knock him out because my corner pushed me not to do that. In the beginning, I tried to hit him hard, but then I stuck to my job."The only thing I wanted to do with this fight is to give praise to Jesus Christ. Supply crisis: Up to 4,000 to train as new HGV drivers to help tackle shortage, government says Sabina Nessa: Book of condolence opened in memory of 28-year-old teacher killed in Kidbrooke, southeast London Sabina Nessa: A teacher who was 'absolutely dedicated to her pupils' and an 'inspiration' to her family "I have been working so hard since January in preparation for this fight, it took me half a year and I didn't see my family for so long."I missed seeing them playing. I want to go home and be happy with my family and I'm not thinking about the rematch." © 2021 Sky UK

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

Consumer 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

Consumer 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

Consumer Resources A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, June 15, 2021, at 9:00 a.m. and continued on Wednesday, June 16, 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, EconomistShaghil Ahmed, Kartik B. Athreya, Rochelle M. Edge, Eric M. Engen, 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 GovernorsMichael 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 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, Chiara Scotti, and Nitish R. Sinha, Special Advisers to the Board, Division of Board Members, Board of GovernorsCarol C. Bertaut, Senior Associate Director, Division of International Finance, Board of Governors; Marnie Gillis DeBoer and David López-Salido, Senior Associate Directors, Division of Monetary Affairs, Board of Governors; Elizabeth Klee, Senior Associate Director, Division of Financial Stability, Board of Governors; David E. Lebow, Senior Associate Director, Division of Research and Statistics, Board of GovernorsBrett Berger,2 Senior Adviser, Division of International Finance, Board of Governors; Ellen E. Meade and Edward Nelson, Senior Advisers, Division of Monetary Affairs, Board of Governors; Jeremy B. Rudd, Senior Adviser, Division of Research and Statistics, Board of GovernorsAndrew Figura, Associate Director, Division of Research and Statistics, Board of Governors; Christopher J. Gust, Associate Director, Division of Monetary Affairs, Board of GovernorsStephanie E. Curcuru2 and Andrea Raffo, Deputy Associate Directors, Division of International Finance, Board of Governors; Laura Lipscomb,2 Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Steve Spurry,2 Deputy Associate Director, Division of Supervision and Regulation, 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, Etienne Gagnon, and Dan Li, Assistant Directors, Division of Monetary Affairs, Board of GovernorsCharles Fleischman, Adviser, Division of Research and Statistics, Board of GovernorsPenelope A. Beattie,3 Section Chief, Office of the Secretary, Board of GovernorsAlyssa Arute,2 Manager, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsSriya Anbil,2 Group Manager, Division of Monetary Affairs, 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 GovernorsDavid M. Byrne, Principal Economist, Division of Research and Statistics, Board of Governors; Michele Cavallo, Bernd Schlusche, Mary Tian, and Francisco Vazquez-Grande, Principal Economists, Division of Monetary Affairs, Board of Governors; Alberto Queralto, Principal Economist, Division of International Finance, 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 M. Diercks, Senior Economist, Division of Monetary Affairs, Board of GovernorsJoseph W. Gruber and Ellis W. Tallman, Executive Vice Presidents, Federal Reserve Banks of Kansas City and Cleveland, respectivelyAnne Baum, Carlos Garriga, Susan McLaughlin,2 Anna Nordstrom,2 Giovanni Olivei, Paolo A. Pesenti, Julie Ann Remache,2 Robert G. Valletta, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of New York, St. Louis, New York, New York, Boston, New York, New York, San Francisco, and Minneapolis, respectivelyRoc Armenter, Jennifer S. Crystal,2 Jonas Fisher, and Matthew Nemeth,2 Vice Presidents, Federal Reserve Banks of Philadelphia, New York, Chicago, and New York, respectivelyJason A. Miu,2 Assistant Vice President, Federal Reserve Bank of New YorkKarel Mertens, Senior Economic Policy Advisor, Federal Reserve Bank of DallasKristopher Gerardi, Financial Economist and Senior Advisor, Federal Reserve Bank of AtlantaHaitham Jendoubi,2 Policy and Markets Analysis Manager, Federal Reserve Bank of New YorkDiscussion of Repurchase Agreement Arrangements Participants resumed their discussion from the April 2021 FOMC meeting of considerations related to the establishment of a domestic standing repurchase agreement (repo) facility (SRF) and a standing Foreign International Monetary Authorities (FIMA) repo facility. Building on discussion at previous meetings, the staff presented considerations for how these facilities might be designed. The design considerations were guided by participants' general desire to have these facilities play a backstop role in fostering effective implementation of monetary policy and supporting smooth functioning of markets. In April, participants highlighted the importance of designing these facilities in a way that would leave ample room for private market activity while minimizing the potential for stigma, promote equitable access to an appropriately broad set of counterparties, and be governed by the FOMC. With these principles and goals in mind, the staff presented potential terms for each facility.The staff presentation on the potential design of a domestic SRF included establishing the minimum bid rate at 25 basis points—the top of the target range for the federal funds rate. The staff briefing suggested counterparties for the facility would include primary dealers and would be extended over time to include banks that expressed interest in participation. The staff presentation noted that such a facility could be limited to only U.S. Treasury securities or could accept all securities currently accepted in open market operations (OMOs), which include Treasury securities, agency securities, and agency mortgage-backed securities (MBS). The briefing noted that, on the one hand, restricting eligible collateral for a domestic SRF to U.S. Treasury securities could mitigate concerns that an SRF could encourage counterparties to take on greater liquidity risk. On the other hand, accepting agency securities and agency MBS in an SRF would be consistent with the structure of current repo operations and could help address a greater range of potential repo market pressures from spilling over into the federal funds market.The proposed design for a standing FIMA repo facility was similar in structure to the existing temporary FIMA repo facility. Under the draft terms, the range of eligible counterparties for the FIMA repo facility would continue to include foreign official institutions, largely comprising central banks, subject to individual approval. The eligible collateral would continue to be limited to U.S. Treasury securities. The draft terms envisioned that the rate for the FIMA repo facility would be set equal to the top of the target range for the federal funds rate, a rate equal to the minimum bid rate in the draft terms for the domestic SRF.In their discussion of considerations related to the design of a domestic SRF, a substantial majority restated their view, conveyed at the April 2021 meeting, that the potential benefits of such a facility outweighed the potential costs. Participants broadly supported the terms presented by the staff for such a facility. Several participants noted the importance of setting the minimum bid rate high enough so that the facility was positioned as a backstop, while some pointed out the importance of not setting the rate so high that usage of the facility could be stigmatized or that the facility would not sufficiently contain pressures that could spill over into the federal funds market. Several participants noted that setting an SRF rate at the top of the target range for the federal funds rate would be consistent with addressing pressures that could spill over to the federal funds market. Others remarked that setting the SRF rate at the same level as the primary credit rate for borrowing at the discount window would promote equitable access to Federal Reserve liquidity across banks and counterparties for OMOs. Several participants commented that it may also be appropriate to adjust the SRF rate over time based on accumulated experience and economic or financial developments. Several participants suggested that, in order to ensure an SRF continues to be effective, it may be appropriate to study the costs and benefits of additional adjustments over time, such as moving to a cleared settlement structure. Most participants noted the benefits of allowing banks to be counterparties to a domestic SRF, including more directly addressing liquidity pressures for participants in the federal funds market and promoting equitable access to liquidity across domestic counterparties. Many participants judged that it would be appropriate to accept the same set of securities that is currently accepted for OMOs. Some participants indicated that accepting these securities in the domestic SRF's operations should increase the effectiveness of the facility in limiting upward pressures in repo markets that could spill over into the federal funds market. Some other participants noted that limiting acceptable securities for SRF operations to U.S. Treasury securities could have benefits, including consistency with the regulatory distinction between U.S. Treasury securities and other types of securities, potentially limiting the Federal Reserve's footprint in financial markets, and maintaining consistency with the structure of the proposed FIMA repo facility and the overnight reverse repo (ON RRP) facility. Several participants cautioned that establishing a backstop SRF would not diminish the importance of providing a sufficiently ample supply of reserves on an ongoing basis or the need to improve the structural resiliency of the U.S. Treasury market. A couple of participants reiterated their concerns about converting current ongoing daily repo operations to a standing facility and suggested ways to calibrate the terms of the facility to mitigate these concerns, including setting a relatively high minimum bid rate or limiting securities eligible for SRF operations to only U.S. Treasury securities.In their discussion of considerations related to the design of a standing FIMA repo facility, a substantial majority supported the broad structure discussed in the staff presentation. Many participants generally saw benefits in keeping the rate at the same level as that in the potential domestic SRF in light of the similar nature of the transactions and high quality of the collateral. A number of participants remarked that the rate at the FIMA repo facility could be set at a higher level than at the domestic SRF or could be set at a level comparable to that in the Federal Reserve's dollar liquidity swap lines. A couple of participants commented on the potential reputational risks of establishing a standing FIMA repo facility, including those associated with providing liquidity on a standing basis to a wider set of central banks and finance ministries than through existing swap lines. These participants reiterated the importance of maintaining well-defined criteria for participation in the facility and suggested that the FOMC should receive regular reports on the operations and counterparties approved for a standing FIMA repo facility.Participants agreed that they would continue their discussion of design parameters for both a domestic SRF and a standing FIMA repo facility. The Chair asked the staff to work on a specific proposal that reflected the views expressed by participants at this meeting.Developments in Financial Markets and Open Market Operations The manager turned first to a discussion of financial market developments over the intermeeting period. On net, U.S. financial conditions eased further, led by a decline in Treasury yields. Lower term premiums appeared to be a significant component of the declines, as reflected by lower implied volatility on longer-term interest rates. Equities rose slightly, the broad dollar weakened, and credit spreads were little changed at historically tight levels.Over the period, market participants focused on data showing lower employment growth and higher inflation readings than had been expected. The median 2021 core personal consumption expenditures (PCE) inflation forecast from the Open Market Desk's Survey of Primary Dealers jumped nearly 1 percentage point from the previous survey. However, median forecasts for 2022 and 2023 each rose less than 0.1 percent, suggesting expectations for inflationary pressures to subside. Inflation compensation as measured by five-year breakeven rates on Treasury Inflation-Protected Securities peaked in mid-May at the highest level in more than a decade, but the increase was driven almost entirely by higher inflation compensation at short horizons. Indeed, one-year-forward inflation compensation at horizons beyond a year was relatively stable.Measures of expectations for Federal Reserve policy were little changed over the period. The median respondent to the Desk's surveys of primary dealers and market participants continued to expect the pace of Federal Reserve asset purchases to begin to decline in the first quarter of 2022, although most respondents also saw a reasonable chance that this decline could occur one quarter earlier or later. The median respondent expected purchases to end in the fourth quarter of 2022. The Desk's survey measures of the expected path of the target federal funds rate were also fairly steady, and the median respondent continued to expect the first target rate increase to occur in the third quarter of 2023. Nearly all Desk survey respondents anticipated that the Summary of Economic Projections would show the median Committee participant projecting either no increase in the target range or one 1/4 percentage point increase by the end of 2023.The manager noted that downward pressure on money market rates continued over the period. Banks continued to limit growth in their balance sheets by allowing wholesale liabilities to mature and encouraging customers to shift some nonoperational deposits to money market funds. Moreover, the supply of Treasury bills, a primary investment for government money market mutual funds, fell further. Against this backdrop, the Secured Overnight Financing Rate (SOFR) printed at 1 basis point each day in the intermeeting period, while the effective federal funds rate (EFFR) decreased 1 basis point, to 6 basis points.Amid heightened demand and reduced supply for short-term investments, the ON RRP continued to maintain a floor on overnight rates. Growth in the ON RRP and other nonreserve liabilities helped expand the base of Federal Reserve liabilities supporting asset purchases, damping the increase in reserves and easing pressure on bank balance sheets.Over the next intermeeting period, the manager anticipated that further increases in reserves and reductions in bill supply could put additional downward pressure on overnight rates. A modest technical adjustment to administered rates could be warranted to maintain the EFFR well within the target range and support smooth functioning of short-term funding markets. Such an adjustment would be expected to raise the federal funds rate and to lift other overnight rates modestly. Most respondents to the Desk's surveys expected an administered rate adjustment this summer. The manager noted that balances at the ON RRP facility would likely continue to grow over coming months. The staff would continue to monitor developments, and the manager noted that, at some point, it could become appropriate to consider raising the counterparty limits for the ON RRP.The manager provided an update on progress toward winding down a number of emergency facilities established under section 13(3) of the Federal Reserve Act. While market participants took note of the Federal Reserve Board's announcement on winding down the Secondary Market Corporate Credit Facility (SMCCF) holdings, it elicited little price response. The commencement of exchange-traded funds sales proceeded smoothly. All of the SMCCF assets are expected to be sold by the end of this year.Finally, the manager noted a proposal to request the Chair's approval for an extension to the temporary U.S. dollar liquidity swap arrangements to December 31, 2021. The extension would benefit the U.S. economy by helping forestall potential pressures in offshore dollar funding markets that could spill over to U.S. financial conditions while much of the global economy remains on an uncertain recovery path from the pandemic. Should the Committee decide to make the FIMA repo facility standing, an extension would also provide sufficient time for those temporary swap line central banks that are not currently enrolled in the FIMA repo facility to do so and to become fully operational.Secretary's note: The Chair subsequently provided approval to the Desk, following the procedures in the Authorization for Foreign Currency Operations, to extend the expiration of the temporary U.S. dollar liquidity swap lines through December 31, 2021.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.Staff Review of the Economic Situation The information available at the time of the June 15–16 meeting suggested that U.S. real gross domestic product (GDP) was expanding in the second quarter at a pace that was faster than in the first quarter of the year. Moreover, labor market conditions had improved further in April and May. Consumer price inflation through April—as measured by the 12-month percentage change in the PCE price index—had picked up notably, largely reflecting transitory factors.Total nonfarm payroll employment increased solidly over April and May, though at a slower monthly pace than over February and March. As of May, total payroll employment had retraced two‑thirds of the job losses seen at the onset of the pandemic, although employment in the leisure and hospitality sector and in the education sector (including both public and private education) had bounced back by less. Over April and May, the unemployment rate edged down and stood at 5.8 percent in May. The unemployment rates for African Americans, Asians, and Hispanics also moved down, although the rates for African Americans and Hispanics remained well above the national average. Both the labor force participation rate and the employment-to-population ratio moved up slightly, and both measures had recovered only partially from their lows during the pandemic. Initial claims for regular state unemployment insurance benefits had moved down further since mid‑April and were at the lowest level since the beginning of the pandemic, though they remained high relative to their pre-pandemic level. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP, which were available through May, suggested that the pace of private employment gains had stepped up late in that month.The pace of increases in several measures of labor compensation had moved up in recent months. Average hourly earnings for all employees jumped at a sizable monthly rate in April and May, even though the large job gains in the leisure and hospitality sector—where wages tend to be lower than in other sectors—likely held down the increases in average hourly earnings in these months. A staff measure of the 12‑month change in the median wage derived from the ADP data had stepped up significantly in April relative to March. The employment cost index of total hourly compensation in the private sector increased at an annual rate of 4 percent in the three months ending in March, a notably faster pace than over the previous three months.Recent 12-month change measures of inflation, using either PCE prices or the consumer price index (CPI), were boosted significantly by the base effects of the drop in prices from the spring of 2020 rolling out of the calculation. In addition, a surge in demand as the economy reopened further, combined with production bottlenecks and supply constraints, contributed to the large recent monthly price increases. Total PCE price inflation was 3.6 percent over the 12 months ending in April. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 3.1 percent over the 12 months ending in April. In contrast, the trimmed mean measure of 12-month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.8 percent in April. In May, the 12-month change in the CPI was 5 percent, while core CPI inflation was 3.8 percent over the same period. In the second quarter, 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 2014, a time when inflation was modest.Real PCE increased substantially in March and then was little changed from that high level in April. The components of the nominal retail sales data that are used to estimate PCE edged down in May, but the sales data for the previous two months were revised up markedly, pointing to stronger real PCE growth than had been initially estimated. Combined with reduced social distancing and more widespread vaccinations, key factors that influence consumer spending—including increasing job gains, the upward trend in real disposable income, high levels of household net worth, and low interest rates—pointed to strong real PCE growth over the rest of the year.Housing demand continued to be robust, with construction of single-family homes and home sales remaining well above their pre-pandemic levels and house prices rising appreciably further. The incoming data for this sector indicated that residential investment spending was being temporarily held back in the second quarter by materials shortages and limited stocks of homes for sale.Available indicators suggested that equipment and intangibles investment—particularly in high-tech categories—was increasing solidly in the second quarter. Rising orders for nondefense capital goods excluding aircraft were running well above the increases in shipments of those goods through April, which pointed to additional gains in business equipment spending in coming months. Moreover, business investment in the drilling and mining sector appeared to be increasing further, as crude oil and natural gas rigs in operation—an indicator of drilling investment—continued to rise through early June, with oil prices moving higher. However, nominal nonresidential construction spending declined further in April, and investment in nonresidential structures outside of the drilling and mining sector looked to remain weak in the current quarter, likely reflecting continued hesitation by businesses to commit to building projects with lengthy times to completion and uncertain future returns.Manufacturing output expanded solidly, on balance, over April and May. Output in the motor vehicle and parts sector rose, on net, although semiconductor shortages were still weighing on vehicle production. Factory output outside of the motor vehicle sector increased solidly, and production in the mining sector, which includes crude oil and natural gas extraction, also increased over April and May.Total real government purchases looked to be about flat, on balance, in the second quarter. Data through May indicated that real federal defense spending was rising only slightly, and nondefense spending was expected to drop following a first-quarter surge in pandemic-related expenditures. State and local government purchases looked to be increasing significantly, as the payrolls of these governments expanded solidly over April and May. Nominal state and local construction spending, however, edged down in April. With the strong economic recovery leading to an improved outlook for state and local tax revenues, and the additional federal support for these governments included in the American Rescue Plan, state and local purchases appeared likely to increase notably over the rest of the year.The nominal U.S. international trade deficit widened to a record size in March and then reversed that widening in April. Real goods exports in March surpassed their January 2020 levels for the first time and then continued to grow in April, with particular strength in exports of capital goods. Real goods imports surged to record-high levels in March and then stepped back modestly in April. Bottlenecks in the global semiconductor industry, which had weighed on exports and imports of automotive products this year, continued to do so through April. Exports and imports of services remained depressed relative to pre-pandemic levels, as international travel increased only slightly from February.Recent data pointed to a pickup in foreign economic activity in the second quarter. Demand improved as social-distancing restrictions were lifted in the United Kingdom and the euro area following the rollout of vaccines. With the economic reopening under way, purchasing managers indexes (PMIs) in both the manufacturing and services sectors were strong in Europe in April and May. In the emerging market economies (EMEs), manufacturing PMIs and exports were generally robust. However, many EMEs continued to struggle to contain the virus amid a slow pace of vaccinations, particularly in South America and parts of Asia. Consumer price inflation continued to rise in many foreign economies, primarily driven by rebounding energy prices and the fading effects of steep price declines seen early last year. Price increases were concentrated in relatively few items, suggesting that underlying inflationary pressures remained subdued amid considerable economic slack.Staff Review of the Financial Situation Overall financial conditions eased during the intermeeting period as market participants appeared to remain confident that the economic recovery was broadly on track, that inflation over the medium term would stay contained, and that monetary policy would remain accommodative. Domestic equity prices edged up, and corporate bond spreads narrowed a little. Yields on nominal Treasury securities declined modestly since the previous FOMC meeting. Measures of inflation compensation at shorter horizons moved down somewhat, on net, while measures of longer-term inflation compensation were little changed. A straight read of overnight index swap (OIS) quotes suggested that the expected path for the federal funds rate moved lower over the intermeeting period and that the expected policy rate would remain below 25 basis points until the first quarter of 2023. Short-term funding markets functioned smoothly amid record participation in the ON RRP facility. Financing conditions for businesses and households remained accommodative, particularly for large firms and households with high credit ratings.The Treasury yield curve flattened a bit, on net, with 2-year yields about unchanged while 5-, 10-, and 30-year yields declined somewhat. Inflation compensation declined a bit at shorter horizons but held steady at longer horizons. Market expectations for the federal funds rate path over the medium term, as implied by OIS quotes unadjusted for term premiums, declined moderately.Broad stock price indexes increased slightly over the intermeeting period, with stocks in cyclically sensitive sectors generally outperforming. One-month option-implied volatility on the S&P 500—the VIX—reached its lowest level since February 2020 and remained a bit below the middle of its historical distribution. Spreads of yields on corporate bonds over those on comparable-maturity Treasury securities narrowed a little for all credit ratings. Meanwhile, yields on municipal bonds reached historical lows, with spreads roughly unchanged for high-credit-rated bonds and moderately narrower for lower-credit-rated bonds.Short-term funding markets continued to function smoothly over the intermeeting period. Short‑term and overnight rates remained near historical lows, with overnight rates dipping slightly. The EFFR was nearly constant throughout the period at 6 basis points, while the SOFR remained at 1 basis point. With rates low and net Treasury bill supply contracting, government money market funds, which at the same time were attracting notable inflows, had limited investment options at nonnegative rates. As a result, ON RRP take-up by these funds surged, pushing total ON RRP participation to record levels in late May and June.International financial market participants were focused on news about inflation and monetary policy communications. In Europe, stronger-than-expected readings for both inflation and economic activity, as well as increased optimism about vaccinations, contributed to a rise in market-based measures of inflation expectations. On net, European longer-term government bond yields were little changed even as U.S. yields declined, and the broad dollar index decreased modestly. In emerging markets, credit spreads narrowed a bit, and capital flows into EME funds continued at a moderate pace. Equity indexes increased somewhat in both emerging and advanced foreign economies.Financing conditions for nonfinancial firms through capital markets remained highly accommodative, as reflected in historically low corporate bond and leveraged loan yields as well as high price-to-earnings ratios in the equity markets. Gross issuance of corporate bonds and leveraged loans was solid. Equity raised through traditional initial public offerings was robust in April but softened to more moderate levels in May and through mid-June, while the pace of seasoned equity offerings was modest over the intermeeting period. Meanwhile, equity issuance through special purpose acquisition companies slowed markedly. Commercial and industrial (C&I) loans outstanding at banks fell through mid-May, with forgiveness of Paycheck Protection Program (PPP) loans continuing to drive balances down and more than offsetting volumes of new loan originations. Tepid demand for loans appears to have been a factor in the decline in loans outstanding. For instance, despite healthy growth in C&I commitments at large banks over the first quarter, there was no corresponding change in the utilization rates of credit lines.The credit quality of large nonfinancial corporations remained largely stable over the intermeeting period. The volume of credit rating upgrades for nonfinancial bonds and leveraged loans outpaced downgrades somewhat in the April-to-early-June period. There were no reported corporate defaults in April, and defaults were low in May. Delinquency rates on bank C&I loans also remained low in the first quarter. Market indicators of future default expectations were little changed and remained low relative to their historical range.In the municipal bond market, financing conditions remained accommodative over the intermeeting period. Issuance of municipal bonds was solid in recent months, and indicators of the credit quality of municipal debt showed some signs of improvement, with the volume of bond upgrades outpacing the volume of bond downgrades.Financing conditions for small businesses were little changed, with supply of small business loans remaining tight and demand still subdued outside of the PPP. While small business loan originations rose in April, surpassing pre-pandemic levels, loans made under the PPP likely accounted for a significant portion of that growth. Loan performance and other indicators of the financial health of small businesses improved in recent months. However, in certain sectors, such as accommodation and food services, small businesses remained stressed.For commercial real estate (CRE) financed through capital markets, financing conditions remained mostly accommodative over the intermeeting period. Issuance of commercial mortgage-backed securities (CMBS) was solid in recent months except in the retail and hotel sectors. Spreads of agency CMBS narrowed to below pre-pandemic levels. Meanwhile, spreads on non-agency triple-A CMBS were little changed at accommodative levels, while non-agency triple-B spreads remained elevated. CRE loan growth at banks continued to be weak through mid-May, likely reflecting weak demand as well as tight underwriting standards.In the residential mortgage market, financing conditions were little changed over the intermeeting period and remained accommodative for stronger borrowers who met standard conforming loan criteria. Credit continued to appear tight for borrowers with lower credit scores. Mortgage rates for most borrowers were little changed, on net, and remained near historical lows. Home-purchase and refinance mortgage activity continued at a strong pace through early June. The share of mortgages in forbearance declined in May.Financing conditions for consumer credit remained generally accommodative. Consumer loans grew at a robust pace in April, driven by rapid growth in auto loan balances. Credit card balances on banks' books rose in May, reversing an April decline. For subprime borrowers, conditions in the credit card market appeared to have eased somewhat further from the tight conditions seen after the onset of the pandemic. Conditions in the asset-backed securities market continued to be supportive of lending during the intermeeting period.Staff Economic Outlook The U.S. economic projection prepared by the staff for the June FOMC meeting was stronger than the April forecast. Real GDP growth was projected to increase substantially this year, with a correspondingly rapid decline in the unemployment rate. Further reductions in social distancing and favorable financial conditions were expected to support output growth, even though the effects of fiscal stimulus on economic growth were starting to unwind. With the boost to growth from continued reductions in social distancing assumed to fade after 2021 and the further unwinding of fiscal stimulus, GDP growth was expected to step down in 2022 and 2023. Nevertheless, with monetary policy assumed to remain highly accommodative, the staff continued to anticipate that real GDP growth would outpace that of potential over most of this period, leading to a decline in the unemployment rate to historically low levels.The staff's near-term outlook for inflation was revised up markedly, but the staff continued to expect the rise in inflation this year to be transitory. The 12‑month change in total and core PCE prices had moved well above 2 percent in April, and incoming CPI data suggested that PCE price inflation would remain high in May. The recent 12-month measures of inflation were being boosted significantly by the base effects of the drop in prices from the spring of 2020 rolling out of the calculation. In addition, the surge in demand as the economy reopened further, combined with production bottlenecks and supply constraints, contributed to the large recent monthly price increases. The staff expected the 12-month change in PCE prices to gradually move down in coming months, reflecting, importantly, the fading of base effects along with smaller expected monthly price increases, but PCE price inflation was forecast to still be well above 2 percent at the end of this year. Over the next year, the transitory price increases caused by bottlenecks and supply constraints were expected to largely reverse, and the growth in demand was forecast to ease. As a result, inflation was projected to slow to slightly below 2 percent in 2022 before moving back up to a bit above 2 percent in 2023, supported by high levels of resource utilization.The staff continued to see the uncertainty surrounding the economic outlook as elevated, although increasingly widespread vaccinations, along with ongoing policy support, were viewed as helping to diminish some of these uncertainties. Nevertheless, the staff judged that the risks around their strong baseline projection for economic activity were still tilted somewhat to the downside, as adverse alternative courses of the pandemic—including the possibility of the spread of more-contagious, more-vaccine-resistant COVID-19 variants—seemed more likely than outcomes that would be more favorable than in the baseline forecast. The staff continued to view the risks around the inflation projection as roughly 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, particularly if there were a significant rise in inflation expectations that altered inflation dynamics. On the downside, if the effects of supply constraints proved to be transitory, as expected, then the inflation record from the past 25 years suggested the possibility that low underlying trend inflation and a flat Phillips curve could cause inflation to revert to relatively low levels despite a strengthening economy.Participants' Views on Current Economic 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 progress on vaccinations had reduced the spread of COVID-19 in the United States. Amid this progress 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 generally noted that the path of the economy would depend significantly on the course of the virus. Progress on vaccinations would likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remained.Participants observed that economic activity was expanding at a historically rapid pace, led by robust gains in consumer spending. A vast majority of participants revised up their projections for real GDP growth this year compared with the projections they had submitted in March, citing stronger consumer demand and improvements in vaccination rates as the primary reasons for these upgrades. That said, participants generally saw supply disruptions and labor shortages as constraining the expansion of economic activity this year. Participants' projections of real GDP growth in 2022 and 2023 were generally little changed.In their discussion of the household sector, participants remarked that indicators of consumer spending had continued to surge and expected that further gains in spending would contribute significantly to the economic recovery. Many participants commented that accommodative financial conditions, the release of pent-up demand, progress on widespread vaccination, the ongoing reduction of social-distancing measures, and fiscal stimulus were important factors supporting spending. Some participants also noted that consumer spending would likely continue to be bolstered by the ongoing effects from these factors as well as by households' elevated level of accumulated savings and generally healthy balance sheets. A majority of participants observed that housing market activity remained strong.With respect to the business sector, most participants noted that activity in the service industries most adversely affected by the pandemic, such as in the leisure and hospitality sector, was rebounding as the economy reopened. A number of participants noted that business equipment investment was rising at a strong pace, but growth in manufacturing activity was being restrained by production bottlenecks and supply constraints. In addition, participants reported hearing from contacts in a broad range of industries that shortages of materials and labor as well as supply chain challenges were limiting the ability of firms to keep up with demand. Some business contacts indicated that they were responding to input shortages and bottlenecks by canceling shifts, raising compensation to attract and retain workers, raising prices, or focusing on cutting costs and increasing productivity, particularly through automation.Participants commented on the continued improvement in labor market conditions in recent months. Job gains in April and May averaged more than 400,000, and the unemployment rate edged down, on net, to 5.8 percent over the period. Many participants pointed to the elevated number of job openings and high rates of job switching as further evidence of the improvement in labor market conditions. Many participants remarked, however, that the economy was still far from achieving the Committee's broad-based and inclusive maximum-employment goal, and some participants indicated that recent job gains, while strong, were weaker than they had expected. A number of participants noted that the labor market recovery continued to be uneven across demographic and income groups and across sectors.Participants noted that their District contacts had reported having trouble hiring workers to meet demand, likely reflecting factors such as early retirements, concerns about the virus, childcare responsibilities, and expanded unemployment insurance benefits. Some participants remarked that these factors were making people either less able or less inclined to work in the current environment. Citing recent wage data and reports from business contacts, many participants judged that labor shortages were putting upward pressure on wages or leading employers to provide additional financial incentives to attract and retain workers, particularly in lower-wage occupations. Participants expected labor market conditions to continue to improve, with labor shortages expected to ease throughout the summer and into the fall as progress on vaccinations continues, social distancing unwinds further, more schools reopen, and expanded unemployment insurance benefits expire.In their discussions on inflation, participants stated that they had expected inflation to move above 2 percent in the near term, in part as the drop in prices from early in the pandemic fell out of the calculation and past increases in oil prices passed through to consumer energy prices. However, participants remarked that the actual rise in inflation was larger than anticipated, with the 12-month change in the PCE price index reaching 3.6 percent in April. Participants attributed the upside surprise to more widespread supply constraints in product and labor markets than they had anticipated and to a larger-than-expected surge in consumer demand as the economy reopened. They noted that many of their District contacts had reported that higher input costs were putting upward pressure on prices. Most participants observed that the largest contributors to the rise in measured inflation were sectors affected by supply bottlenecks or sectors where price levels were rebounding from levels depressed by the pandemic. Looking ahead, participants generally expected inflation to ease as the effect of these transitory factors dissipated, but several participants remarked that they anticipated that supply chain limitations and input shortages would put upward pressure on prices into next year. Several participants noted that, during the early months of the reopening, uncertainty remained too high to accurately assess how long inflation pressures will be sustained. Some participants commented that recent readings of inflation measures that exclude volatile components, such as trimmed mean measures, had been relatively stable at or just below 2 percent. In their comments on longer-term inflation expectations, a number of participants noted that, despite increases earlier this year, measures of longer-term inflation expectations had remained in ranges that were broadly consistent with the Committee's longer-run inflation goal. Others noted that it was this year's increases that had brought these measures to levels that were broadly consistent with the Committee's longer-run inflation goal.Participants noted that overall financial conditions remained highly accommodative, in part reflecting the stance of monetary policy, which continued to deliver appropriate support to the economy. Several participants highlighted, however, that low interest rates were contributing to elevated house prices and that valuation pressures in housing markets might pose financial stability risks.In discussing the uncertainty and risks associated with the economic outlook, participants commented that the process of reopening the economy was unprecedented and likely to be uneven across sectors. Some participants judged that supply chain disruptions and labor shortages complicated the task of assessing progress toward the Committee's goals and that the speed at which these factors would dissipate was uncertain. Accordingly, participants judged that uncertainty around their economic projections was elevated. Although they generally saw the risks to the outlook for economic activity as broadly balanced, a substantial majority of participants judged that the risks to their inflation projections were tilted to the upside because of concerns that supply disruptions and labor shortages might linger for longer and might have larger or more persistent effects on prices and wages than they currently assumed. Several participants expressed concern that longer-term inflation expectations might rise to inappropriate levels if elevated inflation readings persisted. Several other participants cautioned that downside risks to inflation remained because temporary price pressures might unwind faster than currently anticipated and because the forces that held down inflation and inflation expectations during the previous economic expansion had not gone away or might reinforce the effect of the unwinding of temporary price pressures.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 generally agreed that the economic recovery was incomplete and that risks to the economic outlook remained. Although inflation had risen more than anticipated, the increase was seen as largely reflecting temporary factors, and participants expected inflation to decline toward the Committee's 2 percent longer-run objective.Participants judged that the current stance of monetary policy and policy guidance remained appropriate to promote maximum employment as well as to achieve inflation that averages 2 percent over time and longer-term inflation expectations that are well anchored at 2 percent. Participants also reiterated that the existing outcome-based guidance implied that the paths 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 light of the incoming data and the implications for their economic outlooks, a few participants mentioned that they expected the economic conditions set out in the Committee's forward guidance for the federal funds rate to be met somewhat earlier than they had projected in March. Several participants emphasized, however, that uncertainty around the economic outlook was elevated and that it was too early to draw firm conclusions about the paths of the labor market and inflation. In their view, this heightened uncertainty regarding the evolution of the economy also implied significant uncertainty about the appropriate path of the federal funds rate. Some participants noted that communications about the appropriate path of policy would be a focus of market participants in the current environment and commented that it would be important to emphasize that the Committee's reaction function or commitment to its monetary policy framework had not changed.Participants discussed the Federal Reserve's asset purchases and progress toward the Committee's goals since last December when the Committee adopted its guidance for asset purchases. The Committee's standard of "substantial further progress" was generally seen as not having yet been met, though participants expected progress to continue. Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data. Some participants saw the incoming data as providing a less clear signal about the underlying economic momentum and judged that the Committee would have information in coming months to make a better assessment of the path of the labor market and inflation. As a result, several of these participants emphasized that the Committee should be patient in assessing progress toward its goals and in announcing changes to its plans for asset purchases. Participants generally judged that, as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than-anticipated progress toward the Committee's goals or the emergence of risks that could impede the attainment of the Committee's goals.Various participants offered their views on the Committee's agency MBS purchases. Several participants saw benefits to reducing the pace of these purchases more quickly or earlier than Treasury purchases in light of valuation pressures in housing markets. Several other participants, however, commented that reducing the pace of Treasury and MBS purchases commensurately was preferable because this approach would be well aligned with the Committee's previous communications or because purchases of Treasury securities and MBS both provide accommodation through their influence on broader financial conditions. In coming meetings, participants agreed to continue assessing the economy's progress toward the Committee's goals and to begin to discuss their plans for adjusting the path and composition of asset purchases. In addition, participants reiterated their intention to provide notice well in advance of an announcement to reduce the pace of purchases.With regard to the implementation of monetary policy, participants had observed downward pressure on money market rates over the intermeeting period and viewed the possibility of further downward pressure on these rates in the near term as likely. Consequently, they noted that an adjustment to the Federal Reserve's administered rates would help keep the federal funds rate well within the target range and support smooth market functioning of short-term funding markets. Participants agreed that this technical adjustment had no bearing on the appropriate path for the federal funds rate or the stance of monetary policy.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that progress on vaccinations had reduced the spread of COVID-19 in the United States. They noted that amid progress 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 agreed that the path of the economy would depend significantly on the course of the virus. Progress on vaccinations would likely continue to reduce the effects of the public health crisis on the economy, but 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 having run 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 MBS 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 judged that the economic outlook had continued to improve and that the most negative effects of the pandemic on the economy most likely had occurred. As a result, they agreed to remove references in the FOMC statement that noted that the virus was "causing tremendous human and economic hardship" and that "the ongoing public health crisis continues to weigh on the economy." Instead, they agreed to say that progress on vaccinations had reduced the spread of COVID-19 and would likely continue to reduce the negative economic effects of the public health crisis.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 June 17, 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.Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress 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. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but 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 having run 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 raise the interest rates on required and excess reserve balances to 0.15 percent. Setting the interest rate paid on required and excess reserve balances 15 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 Federal Open Market Committee's target range and to support the smooth functioning of short-term funding markets. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective June 17, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, July 27–28, 2021. The meeting adjourned at 10:40 a.m. on June 16, 2021.Notation Vote By notation vote completed on May 18, 2021, the Committee unanimously approved the minutes of the Committee meeting held on April 27–28, 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 text3. Attended through the discussion of economic developments and the outlook. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit public comment on a range of questions related to the implementation of amendments to the Bank Secrecy Act (BSA) regarding the trade in antiquities.  This ANPRM is the first in a series of regulatory actions that FinCEN will undertake to implement Section 6110 of the Anti-Money Laundering Act of 2020 (AML Act), which became law on January 1, 2021 (see The Anti-Money Laundering Act of 2020 | FinCEN.gov for more details on FinCEN’s implementation of that legislation).“This regulatory action demonstrates FinCEN’s continued commitment to implement the AML Act,” said Acting Director Himamauli Das. “I encourage industry and other stakeholders to comment on this ANPRM, which will strengthen the outcome of the rulemaking process.”Section 6110 of the AML Act amended the BSA by including as a type of financial institution a person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.  Section 6110 requires the Secretary of the Treasury to issue proposed rules to carry out the amendment. The trade in antiquities may be exploited by money launderers and terrorist financiers to evade detection by law enforcement and to launder their illicit funds through the U.S. financial system.  Terrorist organizations, transnational criminal networks, and other malign actors may also seek to exploit antiquities to transfer value to acquire new sources of funds, evade detection, and launder proceeds from their illicit activities.  Some terrorist groups have generated revenue from permitting or facilitating the illegal extraction or trafficking of antiquities in territories where they operate.  On March 9, 2021, FinCEN issued a Notice informing financial institutions about ongoing efforts with respect to the requirements of Section 6110 of the AML Act (see FinCEN Notice).  The Notice highlights the AML Act’s amendment to the BSA’s definition of financial institution to include persons engaged in the trade of antiquities.  The AML Act also directs the Secretary to perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.  The Notice provides information about illicit finance risks, as well as specific instructions for financial institutions filing Suspicious Activity Reports, related to the trade in antiquities and art.  This regulatory action furthers the organizing principle around the 2020 National Strategy for Combating Terrorist and Other Illicit Financing that a strong and transparent U.S. financial system denying criminals and malign actors access to funds and the resources they need to carry out nefarious activities, or to profit from their crimes, strengthens U.S. national security and protects Americans.  This action is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade.  FinCEN strongly encourages members of the antiquities industry, law enforcement, civil society groups, and the broader public to submit written comments.  Such written comments will assist FinCEN in developing the proposed rules.   Comments should be submitted by October 25, 2021.

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) today issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit public comment on a range of questions related to the implementation of amendments to the Bank Secrecy Act (BSA) regarding the trade in antiquities.  This ANPRM is the first in a series of regulatory actions that FinCEN will undertake to implement Section 6110 of the Anti-Money Laundering Act of 2020 (AML Act), which became law on January 1, 2021 (see The Anti-Money Laundering Act of 2020 | FinCEN.gov for more details on FinCEN’s implementation of that legislation).“This regulatory action demonstrates FinCEN’s continued commitment to implement the AML Act,” said Acting Director Himamauli Das. “I encourage industry and other stakeholders to comment on this ANPRM, which will strengthen the outcome of the rulemaking process.”Section 6110 of the AML Act amended the BSA by including as a type of financial institution a person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.  Section 6110 requires the Secretary of the Treasury to issue proposed rules to carry out the amendment. The trade in antiquities may be exploited by money launderers and terrorist financiers to evade detection by law enforcement and to launder their illicit funds through the U.S. financial system.  Terrorist organizations, transnational criminal networks, and other malign actors may also seek to exploit antiquities to transfer value to acquire new sources of funds, evade detection, and launder proceeds from their illicit activities.  Some terrorist groups have generated revenue from permitting or facilitating the illegal extraction or trafficking of antiquities in territories where they operate.  On March 9, 2021, FinCEN issued a Notice informing financial institutions about ongoing efforts with respect to the requirements of Section 6110 of the AML Act (see FinCEN Notice).  The Notice highlights the AML Act’s amendment to the BSA’s definition of financial institution to include persons engaged in the trade of antiquities.  The AML Act also directs the Secretary to perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.  The Notice provides information about illicit finance risks, as well as specific instructions for financial institutions filing Suspicious Activity Reports, related to the trade in antiquities and art.  This regulatory action furthers the organizing principle around the 2020 National Strategy for Combating Terrorist and Other Illicit Financing that a strong and transparent U.S. financial system denying criminals and malign actors access to funds and the resources they need to carry out nefarious activities, or to profit from their crimes, strengthens U.S. national security and protects Americans.  This action is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade.  FinCEN strongly encourages members of the antiquities industry, law enforcement, civil society groups, and the broader public to submit written comments.  Such written comments will assist FinCEN in developing the proposed rules.   Comments should be submitted by October 25, 2021.