Mr Floyd, a 46-year-old black man, died while being restrained by Chauvin who is white, during his arrest in Minneapolis. US correspondent @GregMilamSky Tuesday 20 April 2021 23:30, UKPlease use Chrome browser for a more accessible video playerA jury has unanimously convicted Derek Chauvin of the murder of George Floyd.Former Minneapolis police officer Chauvin had denied charges of second-degree murder, third-degree murder and second-degree manslaughter.But after 10 and a half hours of deliberations, the jury convicted the 45-year-old on all counts.Chauvin, whose face was obscured by a COVID mask, showed little emotion as the guilty verdicts were read out.He was remanded in custody, handcuffed and led out of the courtroom.Under the state's sentencing guidelines, he faces 12.5 years in prison for his murder conviction as a first-time offender but prosecutors could seek a maximum of 40 years if the judge determined there were "aggravating factors".President Biden and VP Harris call the Floyd family after the GUILTY verdict! Thank you @POTUS & @VP for your support! We hope that we can count on you for the police reform we NEED in America! ✊🏾 pic.twitter.com/cg4V2D5tlIOutside the court building, a crowd of several hundred people erupted in cheers when the verdicts were announced.There were emotional scenes, as people hugged each other and cried. Chants of "George Floyd" and "All three counts" also broke out.At Minneapolis's George Floyd square, where Mr Floyd was killed and which is now named after him, people screamed, applauded and wept.The site has become a rallying point for racial justice protests.US President Joe Biden, First Lady Jill Biden, and Vice President Kamala Harris called Mr Floyd's family moments after the verdict, according to video posted by family attorney Ben Crump.Mr Biden told them: "Nothing is going to make it all better, but at least now there is some justice."We're all so relieved."Mrs Harris promised them: "We're going to make something good come out of this tragedy."Mr Floyd, a 46-year-old black man, died while being restrained by Chauvin, who is white, during his arrest in the US city in May 2020.Video filmed by bystanders showed Chauvin's knee pressed into Mr Floyd's neck and back for almost nine minutes as he gasped for breath.The footage shocked the world and sparked global protests about racism and police brutality.An unarmed Mr Floyd had been apprehended after allegedly trying to use a counterfeit $20 note to buy cigarettes at a neighbourhood shop in Minneapolis - something senior police officers had said would not normally warrant arrest.However, Chauvin's lawyer argued the former officer had acted reasonably because Mr Floyd kept struggling and he had actually died due to drugs found in his system - both arguments were dismissed by the jury's guilty verdict.So, what unfolded on 25 May 2020?After Donald Williams watched the last moments of George Floyd's life, he called the police because he believed he had witnessed a murder.And now a jury in Minneapolis has agreed with that assessment.But what Mr Williams witnessed from the pavement on 25 May last year was also seen by millions of people around the world within hours of Mr Floyd's death.People using video phones captured the moment officers approached him outside the shop, to the moment his limp body was pulled on to a stretcher and carried into an ambulance.Throughout the footage, Mr Floyd appeared upset, scared, uncooperative but never violent.One of the key recordings came from the then 17-year-old Darnella Frazier, who told the court she stays awake some nights apologising to the memory of Mr Floyd for not intervening.Who can say how differently this story may have played out had the teenager not recorded and shared on social media the anguished death of Mr Floyd?Her mobile phone video - those infamous eight minutes and 46 seconds of footage - exposed the reality of one man's interaction with law enforcement and told a wider story of a history of police brutality and racial inequality in America.A pivotal moment in US history?It also made Chauvin's murder trial a landmark moment for the country.It is rare for any police officer to be charged with murder or manslaughter when they kill someone in the line of duty. Only about a third of those who are charged are convicted.Before Chauvin, only one police officer in Minnesota had been convicted of murder - and he was a Muslim Somali-American.Chauvin's conviction will be welcomed by those who have been calling for a reckoning in the way minority communities, in particular, are treated by police. But it will be seen as only one step on a long road.Officers had been called to the scene on the day Mr Floyd died over reports of the use of a counterfeit $20 note. The police chief of Minneapolis said that was an offence that would not usually merit arrest.Activists say the escalation that followed between Mr Floyd and the officers there, is a familiar story in interactions between police and people of colour.During the Chauvin trial, 20-year-old Daunte Wright was shot dead by a police officer in Minneapolis during a routine traffic stop over expired number plates - a reminder of the point that no-one needed.Minneapolis and America will be forced to examine the events of 25 May 2020 once again when the three other officers who were present, go on trial themselves in the summer, charged with aiding and abetting Chauvin.By then, those demanding fundamental change in America will expect to have seen progress.The anger and disillusionment among whole swathes of the community is very real.George Floyd's death continues to be a pivotal moment in America's history. © 2021 Sky UK
drag me to text box!George Floyd killing: Former police officer Derek Chauvin guilty of murderTuesday 20 April 2021 23:27, UKUS President Joe Biden has told the family of George Floyd he is "relieved" after former police officer Derek Chauvin was convicted of his murder.Chauvin, 45, had denied all three counts, but was found unanimously guilty of second-degree murder, third-degree murder and second-degree manslaughter.He showed no visible emotion as the verdict was handed down and he was refused bail, before being led out of the courtroom in handcuffs to be sentenced in eight weeks' time.Mr Biden called the Floyd family immediately after the verdict. Video footage of the call shared by their lawyer Ben Crump captured the president saying: "Nothing is going to make it all better, but at least now there is some justice. We're all so relieved".President Biden and VP Harris call the Floyd family after the GUILTY verdict! Thank you @POTUS & @VP for your support! We hope that we can count on you for the police reform we NEED in America! ✊🏾 pic.twitter.com/cg4V2D5tlIMr Biden said the family had been "incredible" throughout the trial, that he had been "praying the verdict was the right verdict", and will make further comments at the White House later on Tuesday.Former president Barack Obama tweeted his reaction."Today, a jury did the right thing. But true justice requires much more," he wrote."Michelle and I send our prayers to the Floyd family, and we stand with all those who are committed to guaranteeing every American the full measure of justice that George and so many others have been denied."Today, a jury did the right thing. But true justice requires much more. Michelle and I send our prayers to the Floyd family, and we stand with all those who are committed to guaranteeing every American the full measure of justice that George and so many others have been denied. pic.twitter.com/mihZQHqACVSpeaking outside the courtroom, civil rights activist Reverend Al Sharpton encouraged family members and supporters to link arms in prayer.He said through tears: "We broke down in tears when we heard the verdict. We had to hold each other in tears, but today we can wipe our tears away and fight for another day."Rev Sharpton said the family "don't celebrate a man going to jail", as they would have preferred their loved one be alive.Mr Floyd, 46, died on 25 May last year after being arrested on suspicion of using a counterfeit $20 bill.Video footage that sparked protests around the world showed Chauvin with his knee on Mr Floyd's neck as he pleaded: "I can't breathe".Despite onlookers' pleas for him to stop, he continued for nine-and-half minutes. © 2021 Sky UK
drag me to text box!George Floyd killing: President Biden shares his 'relief' with Floyd family after Derek Chauvin convicted of murderDerek Chauvin was found guilty on all charges - second-degree murder, third-degree murder and second-degree manslaughter. News reporter Tuesday 20 April 2021 23:29, UKThe guilty verdict in the Derek Chauvin case came after a three-week trial during which the jury had to watch harrowing footage and hear distressing testimony of the last moments of George Floyd's life. It heard from numerous witnesses who described the ex-Minneapolis police officer's behaviour as unreasonable and counter to what law enforcement would have been expected to do.Chauvin was found guilty on all charges - second-degree murder, third-degree murder and second-degree manslaughter.The court heard Mr Floyd - a 46-year-old black man - was arrested, refused to get into a patrol car because he suffered from claustrophobia and was then pinned down after police were called over his use of a fake $20 bill.During the time he was held down, prosecution witnesses explained how footage from multiple angles showed the knee of Chauvin - a white officer - on Mr Floyd's neck for nine minutes and 29 seconds.And during the time Mr Floyd was held down, witnesses said officers refused to let first aiders check on his condition even though he had gone limp.After video of eight minutes, 46 seconds of the incident went viral, there were worldwide protests, violence and a furious examination of racism and policing in the US and beyond - events that changed the way many people see racial issues.Here is the story of that day in May that changed the world:Warning: The following describes the final moments of George Floyd's life which some may find upsettingGeorge Perry Floyd Jr had been living in Minneapolis for six years before he died.Some time before 8pm on 25 May 2020, he visited Cup Foods, a store at the corner of the city's East 38th Street and Chicago Avenue.It was memorial day and he was with friends. He was known to have visited Cup Foods before and, this time, went to buy cigarettes, getting out of his SUV, which was parked up nearby.He was served by Christopher Martin, who said Mr Floyd spoke slowly and sounded a bit like he was under the influence of drugs, but was friendly and talkative as he handed over a $20 bill.Mr Martin immediately saw something suspicious about the note, but accepted it because, he told the court, he did not think Mr Floyd knew it was fake and thought he'd "be doing him a favour".But something afterwards made him tell his manager, and within seconds, he was sent out of the shop to ask Mr Floyd to come back inside.Mr Floyd refused, prompting the manager to ask another employee to call police, who arrived on the scene soon after.Body-worn video recorded by one of the attending officers showed how, as they arrived, one of the officers tapped on the window of Mr Floyd's car, then, as he opened the door, pointed a pistol at him.Mr Floyd reacted with shock, saying: "Please don't shoot me, please, man. Please, man, I didn't know," and was quickly cuffed.The prosecutor, Steve Schleicher, said Mr Floyd was completely compliant as he was asked to cross the street, provide his name and then go to a patrol car.But, as they tried to put him into a patrol vehicle, he became agitated, telling them he was claustrophobic.Mr Schleicher told the jury during his summing up: "He tried to explain himself to the officers that he had anxiety, that he had claustrophobia. He explained this over and over. They wanted him to get in the back of this little car and, you know, he just wasn't able to bring himself to do it…"So they don't listen. They just shove him into the car, into that tiny back seat. You saw the look on his face… when he glanced over into that car, he looked like he'd seen a monster."An officer told him to "stop resisting", to which Mr Floyd responded: "I'm not."In an attempt to reason with them, he said: "I'ma (going to) die, man… I'm not a bad guy."The altercation between officers and Mr Floyd quickly drew a crowd, many of whom started filming what was happening on their phones, concerned at what they were seeing.Alisha Oyler, a cashier at a store across the road from Cup Foods, said she started recording because police were "always messing with people".Darnella Frazier, 18, recorded the footage that later went viral and provoked protests around the world.The teenager said she had been walking to a convenience store with her nine-year-old cousin when she realised what was happening. She sent her cousin inside because she didn't want her to see how "terrified, scared" Mr Floyd was, and how he was "begging for his life".She said that, because of the actions of police, Mr Floyd "was suffering, he was in pain".Another bystander, Charles McMillian, realising what was happening and worried for his safety, called out to Mr Floyd, saying: "You can't win."Giving evidence during which he wept openly, Mr McMillian said Mr Floyd replied: "I'm not trying to win. I'm scared."Mr Schleicher told the court that when officers stopped trying to push him in the car, Mr Floyd said "thank you", in gratitude for not making him get inside.But seconds later he found himself on the floor and, despite what Mr Schleicher said was a lack of non-compliance, he was pressed to the ground, face down, with "a knee on the neck and a knee on the back and the defendant's weight on Mr Floyd pushing down".The prosecutor said Chauvin's knee then stayed on Mr Floyd's neck for nine minutes and 29 seconds, 43 seconds longer than the previously often-quoted eight minutes, 46 seconds.It was a move that proved fatal.Several witnesses said Chauvin remained on top of him, despite numerous pleas from bystanders and from pleas from Mr Floyd himself.He was heard on video footage calling out a number of times: "I love you mama" and "I can't breathe".Mr Schleicher said his voice then slowed and faded.An off-duty firefighter, Genevieve Hansen, told the court she saw what happened and, because she was medically trained, repeatedly asked to check Mr Floyd's pulse.She said she did so because she saw fluid coming from Mr Floyd's body and, because of her training, knew that patients sometimes release their bladders when they are dying.Her 911 call from the scene was played to the jury and she could be heard saying: "I literally watched police officers not take a pulse and not do anything to save a man."Ms Hansen said she was told by one of Chauvin's police officer colleagues to stay away from Mr Floyd while he was being knelt on, saying he had told her: "If you are a Minneapolis firefighter, you would know better than to get involved."Police emergency call handler Jena Scurry, who was working at the time of Mr Floyd's death, told the court she thought her screen had frozen when she saw how long police had been on top of Mr Floyd while watching live video footage from a police camera.When the police shift supervisor David Pleoger arrived on the scene, Mr Floyd was not offering any resistance, but officers - who were trained to roll suspects on to their sides to help with their breathing - had not moved him.Paramedic Seth Bravinder said, when he arrived, several officers were on top of Mr Floyd.One of the earliest first responders on the scene, he added that when he examined Mr Floyd, the 46-year-old was "unresponsive", his head was limp and he had flatlined, after a cardiac arrest.Several police expert witnesses said the degree and type of force used by Chauvin was beyond that which should have been used in the situation.Lieutenant Richard Zimmerman, the head of the Minneapolis homicide department, said the restraint should have stopped as soon as Mr Floyd was handcuffed and on the ground.Medaria Arradondo, Minneapolis' first black police chief, gave evidence against one of his own officers, saying "in no way, shape or form" did Chauvin's actions follow the department's policy or training and "certainly [were] not part of our ethics or our values".Lieutenant Johnny Mercil, a use-of-force instructor, said the neck restraint Chauvin used was not authorised.It emerged during the trial that Chauvin took part in use-of-force training in 2018 and completed a 40-hour course on recognising people in a crisis in 2016.Sergeant Ker Yang, the officer in charge of crisis-intervention training, said officers were taught to "slow things down and re-evaluate and reassess".Another use of force expert, Los Angeles Police Department sergeant Jody Stiger, testified that the degree of force applied to Mr Floyd's neck area by Chauvin did not change throughout the entire nine minutes 29 seconds.During Mr Stiger's evidence, the jury was shown a series of five photos taken from footage of the arrest at various points, which the sergeant said showed Chauvin's left knee on Mr Floyd's neck, or neck area.Because Chauvin refused to testify, the jury never received a full explanation about why he acted in the way he did.The only hint they received was a comment heard by a bystander, who told the court Chauvin said, after an ambulance took away Mr Floyd: "We gotta control this guy 'cause he's a sizable guy... and it looks like he's probably on something."A series of doctors took the stand to say they believed that Mr Floyd died of asphyxia as a result of his neck and chest being compressed.Among them, Dr Bradford Langenfeld, a senior resident on duty that night at Hennepin County Medical Centre, told the jury, based on the information he had, it was "more likely than the other possibilities" that Mr Floyd's heart stopped because of asphyxia, or insufficient oxygen.Dr Lindsey Thomas, a forensic pathologist, was adamant the death was not due to fentanyl, or methamphetamine, as the defence claimed, or due to Mr Floyd's underlying health conditions.She said: "There was nothing sudden about his death… Likewise, it was not the type of death that has been reported in fentanyl overdose, for example, where someone becomes very sleepy and then just sort of gradually, calmly, peacefully stops breathing."She said wounds seen on Mr Floyd's body after his death were "consistent with what it looks like on the video, that he's struggling to push himself into a position where he can breathe".Most significant however was evidence from Dr Martin Tobin, a lung and critical care specialist from Chicago, who said he watched footage of the arrest "hundreds of times" to help him work out where officers were positioned in relation to Mr Floyd when he was on the ground.A photo shown to the jury showed the toe of Chauvin's boot off the ground.Dr Tobin said it meant all of the ex-officer's 91.5lbs of body weight was "being directed down onto Mr Floyd's neck" at this point in the arrest.Mr Floyd was effectively sandwiched between the street and the officers, putting his left side "in a vice", Dr Tobin said, and the effect on his left lung was deadly.He said a photo from the footage that showed Mr Floyd pressing his fingers against the tyre of the police car showed how Mr Floyd had "used up his resources and he's now literally trying to breathe with his fingers and knuckles".Dr Tobin also narrated video pinpointing what he said was the moment Mr Floyd died - indicated by a change in his face and a tell-tale leg kick - about five minutes after police began holding him down."You can see his eyes. He's conscious, and then you see that he isn't," Dr Tobin said. "That's the moment the life goes out of his body."Only one prosecution medical expert, Hennepin County medical examiner Dr Andrew Baker, expressed a different opinion, maintaining that police "subdual, restraint and neck compression" caused Mr Floyd's heart to stop.He admitted however he was no expert in breathing and said he would defer to the other experts.As well as medical and police experts, the trial heard from those who knew Mr Floyd and could testify as to how he was missed.Mr Floyd's girlfriend Courteney Ross tearfully told the story of how they first met at a Salvation Army shelter in 2017.The 45-year-old, who said she noticed him immediately because of his "great, deep Southern voice", admitted how they both struggled with opioid addiction.But she explained that it had only occurred because they suffered from pain."Both Floyd and I, our story, it's a classic story of how many people get addicted to opioids," she said. "We both suffered from chronic pain. Mine was in my neck and his was in his back."We both had prescriptions. But after prescriptions that were filled and we got addicted and tried really hard to break that addiction many times."And it was the stories told by his brother, Philonise, which underlined the hole left behind by his death.The 39-year-old described growing up in a poor area of Houston, Texas, with his older brother George and their three siblings, before George moved away.He said they used to play Nintendo, basketball and American football and said George deliberately threw the ball at different angles so Philonise would have to practice diving for it."I always thought my brother couldn't throw. But he never intended to throw the ball to me," he said, smiling.He lovingly recalled how George used to make the best banana mayonnaise sandwiches and the way George used to mark his height on the wall as a boy because he wanted to grow taller.He said George "was a big momma's boy" and was inconsolable at her funeral in 2018, who everyone in the community knew as Miss Cissy.Shown a photo of George and his late mother, he broke down, saying: "I miss them both." © 2021 Sky UK
drag me to text box!Derek Chauvin guilty of murder: The story of the day George Floyd was killed - and the moments leading up to his deathTuesday 20 April 2021 23:22, UKAll English clubs have now pulled out of the European Super League.Manchester United, Liverpool, Arsenal and Tottenham Hotspur have confirmed they will follow Manchester City and Chelsea in withdrawing from the planned tournament.United said: "We will not be participating in the European Super League".Chelsea, faced with an angry protest from their fans, were first in saying they were preparing documents to formally withdraw, with club owner Roman Abramovich understood to have driven the decision, having listened to fan protests and opted to back out.Tottenham chairman Daniel Levy said he regretted the "anxiety and upset" caused as he confirmed the club had "formally commenced procedures to withdraw from the group developing proposals for a European Super League (ESL)."In a brief statement Liverpool said: "Liverpool Football Club can confirm that our involvement in proposed plans to form a European Super League has been discontinued."In recent days, the club has received representations from various key stakeholders, both internally and externally, and we would like to thank them for their valuable contributions."Meanwhile Arsenal admitted to making "a mistake" and apologised after confirming their withdrawal from the proposed Super League.An open letter from the club's board said: "The last few days have shown us yet again the depth of feeling our supporters around the world have for this great club and the game we love."We needed no reminding of this but the response from supporters in recent days has given us time for further reflection and deep thought."Man City said in a statement that it had "enacted the procedures to withdraw from the group developing plans for a European Super League".Club statement.https://t.co/GeNQZn8091City player Raheem Sterling reacted to the news by tweeting the words: "Ok bye".Manager Pep Guardiola had previously criticised the plans for the "closed shop" league, as fans from other clubs gathered outside stadiums up and down the country.UEFA president Aleksander Ceferin said he was "delighted to welcome City back to the European football family"."They have shown great intelligence in listening to the many voices - most notably their fans - that have spelled out the vital benefits that the current system has for the whole of European football; from the world-beating Champions League final right down to a young player's first coaching session at a grassroots club," he wrote.And the FA said: "English football has a proud history based on opportunity for all clubs and the game has been unanimous in its disapproval of a closed league. It was a proposition that, by design, could have divided our game; but instead, it has unified us all."Ok bye 👋🏾pic.twitter.com/X2ZFqJ9T4LThe move leaves Spanish and Italian clubs in the breakaway competition, which sparked a huge backlash since plans were announced on Sunday.Fans gathered outside Stamford Bridge to protest on Tuesday, with police forced to close roads and make a number of arrests, and match officials delaying the kickoff of Chelsea's game against Brighton by 15 minutes.Reserve goalkeeper and coach Petr Cech was seen outside the ground, among the protesters, appealing for calm.Supporters clutched placards that read "RIP football" and "No to Super League" ahead of Tuesday night's match and cheered as news of their club's decision broke.Liverpool Captain Jordan Henderson tweeted late on Tuesday that "we don't like it and we don't want it to happen".The team's time sponsor Tribus said they were leaving them as they "cannot support the move by the clubs' owners".Please use Chrome browser for a more accessible video playerAt a Downing Street news briefing earlier, Prime Minister Boris Johnson said the UK government would do all it could to prevent the Super League going ahead.He applauded the news as it broke, tweeting: "The decision by Chelsea and Manchester City is - if confirmed - absolutely the right one and I commend them for it. I hope the other clubs involved in the European Super League will follow their lead."Culture Secretary Oliver Dowden added: "Good news that Chelsea and City have seen sense, and I urge the rest to follow swiftly. "The whole ESL move shows how out-of-touch these owners are. They have completely misjudged the strength of feeling from fans, players and the whole country. Football is for the fans."The Premier League said that it is "considering all actions to prevent the plans from progressing", while FIFA President Gianni Infantino warned that clubs would have to "live with the consequences" of their decisions.Amid threats of refusing to grant players' visas and withdrawals of matchday funding, a Spanish court ruled that FIFA nor UEFA should sanction players or teams involved before the Super League had been dealt with properly.The commercial court in Madrid's ruling is preliminary, however, and it is not clear if it has jurisdiction abroad.Real Madrid chairman Florentino Pérez, who is also the chairman of the new league, has defended the concept, claiming it will "save football".But his predecessor Ramon Calderon told Sky News it would "kill football" and warned that "successful or not, the harm has already been done" among fans.He said: "It's a stab in the back of football. Many clubs will disappear, with academies and grassroots."I think it's very sad, disgraceful."Eyewitness: 'We've just made history' - Chelsea fans welcome move to pull outBy Enda Brady, news correspondent"We've just made history, we've just made history."The news spread around Stamford Bridge like wildfire, Chelsea had just become the first club to formally withdraw from the proposed European Super League before a ball had even been kicked.Hundreds of fans had gathered outside the stadium before the club's Premier League match against Brighton to voice their anger at the project.One banner, aimed at owner Roman Abramovich read: "18 years, 16 trophies. What legacy?"Chelsea's former goalkeeper Petr Cech, now a coach at the club, waded into the crowd urging them to keep calm. He obviously knew that a bombshell announcement was imminent.And as fans watched the news break on their mobile phones, up went a chant. "We've got our Chelsea back, we've got our Chelsea back."One fan held a placard that read simply: "We want our cold nights in Stoke." © 2021 Sky UK
drag me to text box!Victory for fans as all six English teams pull out of European Super LeagueConsumer Resources January 26-27, 2021A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, January 26, 2021, at 1:00 p.m. and continued on Wednesday, January 27, 2021, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Raphael W. Bostic Michelle W. Bowman Lael Brainard Richard H. Clarida Mary C. Daly Charles L. Evans Randal K. Quarles Christopher J. WallerJames Bullard, Esther L. George, Loretta J. Mester, Helen E. Mucciolo, and Eric Rosengren, Alternate Members of the Federal Open Market CommitteePatrick Harker, Robert S. Kaplan, and Neel Kashkari, Presidents of the Federal Reserve Banks of Philadelphia, Dallas, and Minneapolis, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, David Altig, Kartik B. Athreya, Brian M. Doyle, Rochelle M. Edge, Eric M. Engen, Beverly Hirtle, and William Wascher, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountPatricia Zobel, Deputy Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsMatthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsDaniel M. Covitz, Deputy Director, Division of Research and Statistics, Board of Governors; Sally Davies, Deputy Director, Division of International Finance, Board of Governors; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Division of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Division of Board Members, Board of GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis, and Chiara Scotti, Special Advisers to the Board, Division of Board Members, Board of GovernorsJohn J. Stevens, Senior Associate Director, Division of Research and Statistics, Board of Governors; Gretchen C. Weinbach, Senior Associate Director, Division of Monetary Affairs, Board of GovernorsEllen E. Meade and Robert J. Tetlow, Senior Advisers, Division of Monetary Affairs, Board of Governors; Steven A. Sharpe, Senior Adviser, Division of Research and Statistics, Board of GovernorsMarnie Gillis DeBoer and Min Wei, Associate Directors, Division of Monetary Affairs, Board of Governors; Andrew Figura, Associate Director, Division of Research and Statistics, Board of GovernorsEric C. Engstrom, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsJennifer Gallagher, Special Assistant to the Board, Division of Board Members, Board of GovernorsBrian J. Bonis, Assistant Director, Division of Monetary Affairs, Board of GovernorsPenelope A. Beattie, Section Chief, Office of the Secretary, Board of GovernorsMark A. Carlson, Senior Economic Project Manager, Division of Monetary Affairs, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Olesya Grishchenko, Horacio Sapriza, and Fabian Winkler, Principal Economists, Division of Monetary Affairs, Board of Governors; Pablo Cuba-Borda, Principal Economist, Division of International Finance, Board of Governors; Andrew Paciorek, Principal Economist, Division of Research and Statistics, Board of GovernorsRandall A. Williams, Lead Information Manager, Division of Monetary Affairs, Board of GovernorsJoseph W. Gruber, Daleep Singh, and Ellis W. Tallman, Executive Vice Presidents, Federal Reserve Banks of Kansas City, New York, and Cleveland, respectivelyDavid Andolfatto, Spencer Krane, Keith Sill, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of St. Louis, Chicago, Philadelphia, and Minneapolis, respectivelyJoe Peek, Vice President, Federal Reserve Bank of BostonJames Dolmas, Economic Policy Advisor and Senior Research Economist, Federal Reserve Bank of DallasAndrew Foerster, Research Advisor, Federal Reserve Bank of San FranciscoAnnual Organizational Matters3 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 26, 2021, were received and that these individuals executed their oaths of office.The elected members and alternate members were as follows:John C. Williams, President of the Federal Reserve Bank of New York, with Helen E. Mucciolo, First Vice President of the Federal Reserve Bank of New York, as alternateThomas I. Barkin, President of the Federal Reserve Bank of Richmond, with Eric Rosengren, President of the Federal Reserve Bank of Boston, as alternateCharles L. Evans, President of the Federal Reserve Bank of Chicago, with Loretta J. Mester, President of the Federal Reserve Bank of Cleveland, as alternateRaphael W. Bostic, President of the Federal Reserve Bank of Atlanta, with James Bullard, President of the Federal Reserve Bank of St. Louis, as alternateMary C. Daly, President of the Federal Reserve Bank of San Francisco, with Esther L. George, President of the Federal Reserve Bank of Kansas City, as alternateBy unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2022:By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA).By unanimous vote, the Committee selected Lorie K. Logan and Patricia Zobel to serve at the pleasure of the Committee as manager and deputy manager of the SOMA, respectively, on the understanding that these selections were subject to being satisfactory to the Federal Reserve Bank of New York.Secretary's note: The Federal Reserve Bank of New York subsequently sent advice that the manager and deputy manager selections indicated previously were satisfactory.By unanimous vote, the Committee voted to reaffirm without revision the Authorization for Domestic Open Market Operations, the Authorization for Foreign Currency Operations, and the Foreign Currency Directive, as shown below. The Guidelines for the Conduct of System Open Market Operations in Federal-Agency Issues remained suspended.AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS (As reaffirmed effective January 26, 2021)OPEN MARKET TRANSACTIONS1. The Federal Open Market Committee (the "Committee") authorizes and directs the Federal Reserve Bank selected by the Committee to execute open market transactions (the "Selected Bank"), to the extent necessary to carry out the most recent domestic policy directive adopted by the Committee:A. To buy or sell in the open market securities that are direct obligations of, or fully guaranteed as to principal and interest by, the United States, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, that are eligible for purchase or sale under Section 14(b) of the Federal Reserve Act ("Eligible Securities") for the System Open Market Account ("SOMA"):i. As an outright operation with securities dealers and foreign and international accounts maintained at the Selected Bank: on a same-day or deferred delivery basis (including such transactions as are commonly referred to as dollar rolls and coupon swaps) at market prices; orii. As a temporary operation: on a same-day or deferred delivery basis, to purchase such Eligible Securities subject to an agreement to resell ("repo transactions") or to sell such Eligible Securities subject to an agreement to repurchase ("reverse repo transactions") for a term of 65 business days or less, at rates that, unless otherwise authorized by the Committee, are determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual counterparties;B. To allow Eligible Securities in the SOMA to mature without replacement;C. To exchange, at market prices, in connection with a Treasury auction, maturing Eligible Securities in the SOMA with the Treasury, in the case of Eligible Securities that are direct obligations of the United States or that are fully guaranteed as to principal and interest by the United States; andD. To exchange, at market prices, maturing Eligible Securities in the SOMA with an agency of the United States, in the case of Eligible Securities that are direct obligations of that agency or that are fully guaranteed as to principal and interest by that agency.SECURITIES LENDING2. In order to ensure the effective conduct of open market operations, the Committee authorizes the Selected Bank to operate a program to lend Eligible Securities held in the SOMA to dealers on an overnight basis (except that the Selected Bank may lend Eligible Securities for longer than an overnight term to accommodate weekend, holiday, and similar trading conventions).A. Such securities lending must be:i. At rates determined by competitive bidding;ii. At a minimum lending fee consistent with the objectives of the program;iii. Subject to reasonable limitations on the total amount of a specific issue of Eligible Securities that may be auctioned; andiv. Subject to reasonable limitations on the amount of Eligible Securities that each borrower may borrow.B. The Selected Bank may:i. Reject bids that, as determined in its sole discretion, could facilitate a bidder's ability to control a single issue;ii. Accept Treasury securities or cash as collateral for any loan of securities authorized in this paragraph 2; andiii. Accept agency securities as collateral only for a loan of agency securities authorized in this paragraph 2.OPERATIONAL READINESS TESTING3. The Committee authorizes the Selected Bank to undertake transactions of the type described in paragraphs 1 and 2 from time to time for the purpose of testing operational readiness, subject to the following limitations:A. All transactions authorized in this paragraph 3 shall be conducted with prior notice to the Committee;B. The aggregate par value of the transactions authorized in this paragraph 3 that are of the type described in paragraph 1.A.i, 1.B, 1.C and 1.D shall not exceed $5 billion per calendar year; andC. The outstanding amount of the transactions described in paragraphs 1.A.ii and 2 shall not exceed $5 billion at any given time.TRANSACTIONS WITH CUSTOMER ACCOUNTS4. In order to ensure the effective conduct of open market operations, while assisting in the provision of short-term investments or other authorized services for foreign central bank and international accounts maintained at a Federal Reserve Bank (the "Foreign Accounts") and accounts maintained at a Federal Reserve Bank as fiscal agent of the United States pursuant to section 15 of the Federal Reserve Act (together with the Foreign Accounts, the "Customer Accounts"), the Committee authorizes the following when undertaken on terms comparable to those available in the open market:A. The Selected Bank, for the SOMA, to:i. Undertake reverse repo transactions in Eligible Securities held in the SOMA with the Customer Accounts for a term of 65 business days or less; andii. Undertake repo transactions in Eligible Securities with Foreign Accounts; andB. Any Federal Reserve Bank that maintains Customer Accounts, for any such Customer Account, when appropriate and subject to all other necessary authorization and approvals, to:i. Undertake repo transactions in Eligible Securities with dealers with a corresponding reverse repo transaction in such Eligible Securities with the Customer Accounts; andii. Undertake intra-day repo transactions in Eligible Securities with Foreign Accounts.Transactions undertaken with Customer Accounts under the provisions of this paragraph 4 may provide for a service fee when appropriate. Transactions undertaken with Customer Accounts are also subject to the authorization or approval of other entities, including the Board of Governors of the Federal Reserve System and, when involving accounts maintained at a Federal Reserve Bank as fiscal agent of the United States, the United States Department of the Treasury.ADDITIONAL MATTERS5. The Committee authorizes the Chair of the Committee, in fostering the Committee's objectives during any period between meetings of the Committee, to instruct the Selected Bank to act on behalf of the Committee to:A. Adjust somewhat in exceptional circumstances the stance of monetary policy and to take actions that may result in material changes in the composition and size of the assets in the SOMA; orB. Undertake transactions with respect to Eligible Securities in order to appropriately address temporary disruptions of an operational or highly unusual nature in U.S. dollar funding markets.Any such adjustment described in subparagraph A of this paragraph 5 shall be made in the context of the Committee's discussion and decision about the stance of policy at its most recent meeting and the Committee's long-run objectives to foster maximum employment and price stability, and shall be based on economic, financial, and monetary developments since the most recent meeting of the Committee. The Chair, whenever feasible, will consult with the Committee before making any instruction under this paragraph 5.AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS (As reaffirmed effective January 26, 2021)IN GENERAL1. The Federal Open Market Committee (the "Committee") authorizes the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions for the System Open Market Account as provided in this Authorization, to the extent necessary to carry out any foreign currency directive of the Committee:A. To purchase and sell foreign currencies (also known as cable transfers) at home and abroad in the open market, including with the United States Treasury, with foreign monetary authorities, with the Bank for International Settlements, and with other entities in the open market. This authorization to purchase and sell foreign currencies encompasses purchases and sales through standalone spot or forward transactions and through foreign exchange swap transactions. For purposes of this Authorization, foreign exchange swap transactions are: swap transactions with the United States Treasury (also known as warehousing transactions), swap transactions with other central banks under reciprocal currency arrangements, swap transactions with other central banks under standing dollar liquidity and foreign currency liquidity swap arrangements, and swap transactions with other entities in the open market.B. To hold balances of, and to have outstanding forward contracts to receive or to deliver, foreign currencies.2. All transactions in foreign currencies undertaken pursuant to paragraph 1 above shall, unless otherwise authorized by the Committee, be conducted:A. In a manner consistent with the obligations regarding exchange arrangements under Article IV of the Articles of Agreement of the International Monetary Fund (IMF).1B. In close and continuous cooperation and consultation, as appropriate, with the United States Treasury.C. In consultation, as appropriate, with foreign monetary authorities, foreign central banks, and international monetary institutions.D. At prevailing market rates.STANDALONE SPOT AND FORWARD TRANSACTIONS3. For any operation that involves standalone spot or forward transactions in foreign currencies:A. Approval of such operation is required as follows:i. The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the "Subcommittee") must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available.ii. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee.B. Such an operation also shall be:i. Generally directed at countering disorderly market conditions; orii. Undertaken to adjust System balances in light of probable future needs for currencies; oriii. Conducted for such other purposes as may be determined by the Committee.C. For purposes of this Authorization, the overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.WAREHOUSING4. The Committee authorizes the Selected Bank, with the prior approval of the Subcommittee and at the request of the United States Treasury, to conduct swap transactions with the United States Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934 under agreements in which the Selected Bank purchases foreign currencies from the Exchange Stabilization Fund and the Exchange Stabilization Fund repurchases the foreign currencies from the Selected Bank at a later date (such purchases and sales also known as warehousing).RECIPROCAL CURRENCY ARRANGEMENTS, AND STANDING DOLLAR AND FOREIGN CURRENCY LIQUIDITY SWAPS5. The Committee authorizes the Selected Bank to maintain reciprocal currency arrangements established under the North American Framework Agreement, standing dollar liquidity swap arrangements, temporary dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements as provided in this Authorization and to the extent necessary to carry out any foreign currency directive of the Committee.A. For reciprocal currency arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).B. For standing and temporary dollar liquidity swap arrangements all drawings must be approved in advance by the Chair. The Chair may approve a schedule of potential drawings, and may delegate to the manager, System Open Market Account, the authority to approve individual drawings that occur according to the schedule approved by the Chair.C. For standing foreign currency liquidity swap arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).D. Operations involving standing and temporary dollar liquidity swap arrangements and standing foreign currency liquidity swap arrangements shall generally be directed at countering strains in financial markets in the United States or abroad, or reducing the risk that they could emerge, so as to mitigate their effects on economic and financial conditions in the United States.E. For reciprocal currency arrangements, standing and temporary dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements:i. All arrangements are subject to annual review and approval by the Committee;ii. Any new arrangements must be approved by the Committee; andiii. Any changes in the terms of existing arrangements must be approved in advance by the Chair. The Chair shall keep the Committee informed of any changes in terms, and the terms shall be consistent with principles discussed with and guidance provided by the Committee.OTHER OPERATIONS IN FOREIGN CURRENCIES6. Any other operations in foreign currencies for which governance is not otherwise specified in this Authorization (such as foreign exchange swap transactions with private‑sector counterparties) must be authorized and directed in advance by the Committee.FOREIGN CURRENCY HOLDINGS7. The Committee authorizes the Selected Bank to hold foreign currencies for the System Open Market Account in accounts maintained at foreign central banks, the Bank for International Settlements, and such other foreign institutions as approved by the Board of Governors under Section 214.5 of Regulation N, to the extent necessary to carry out any foreign currency directive of the Committee.A. The Selected Bank shall manage all holdings of foreign currencies for the System Open Market Account:i. Primarily, to ensure sufficient liquidity to enable the Selected Bank to conduct foreign currency operations as directed by the Committee;ii. Secondarily, to maintain a high degree of safety;iii. Subject to paragraphs 7.A.i and 7.A.ii, to provide the highest rate of return possible in each currency; andiv. To achieve such other objectives as may be authorized by the Committee.B. The Selected Bank may manage such foreign currency holdings by:i. Purchasing and selling obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof ("Permitted Foreign Securities") through outright purchases and sales;ii. Purchasing Permitted Foreign Securities under agreements for repurchase of such Permitted Foreign Securities and selling such securities under agreements for the resale of such securities; andiii. Managing balances in various time and other deposit accounts at foreign institutions approved by the Board of Governors under Regulation N.C. The Subcommittee, in consultation with the Committee, may provide additional instructions to the Selected Bank regarding holdings of foreign currencies.ADDITIONAL MATTERS8. The Committee authorizes the Chair:A. With the prior approval of the Committee, to enter into any needed agreement or understanding with the Secretary of the United States Treasury about the division of responsibility for foreign currency operations between the System and the United States Treasury;B. To advise the Secretary of the United States Treasury concerning System foreign currency operations, and to consult with the Secretary on policy matters relating to foreign currency operations;C. To designate Federal Reserve System persons authorized to communicate with the United States Treasury concerning System Open Market Account foreign currency operations; andD. From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary and Financial Policies.9. The Committee authorizes the Selected Bank to undertake transactions of the type described in this Authorization, and foreign exchange and investment transactions that it may be otherwise authorized to undertake, from time to time for the purpose of testing operational readiness. The aggregate amount of such transactions shall not exceed $2.5 billion per calendar year. These transactions shall be conducted with prior notice to the Committee.10. All Federal Reserve banks shall participate in the foreign currency operations for System Open Market Account in accordance with paragraph 3G(1) of the Board of Governors' Statement of Procedure with Respect to Foreign Relationships of Federal Reserve Banks dated January 1, 1944.11. Any authority of the Subcommittee pursuant to this Authorization may be exercised by the Chair if the Chair believes that consultation with the Subcommittee is not feasible in the time available. The Chair shall promptly report to the Subcommittee any action approved by the Chair pursuant to this paragraph.12. The Committee authorizes the Chair, in exceptional circumstances where it would not be feasible to convene the Committee, to foster the Committee's objectives by instructing the Selected Bank to engage in foreign currency operations not otherwise authorized pursuant to this Authorization. Any such action shall be made in the context of the Committee's discussion and decisions regarding foreign currency operations. The Chair, whenever feasible, will consult with the Committee before making any instruction under this paragraph.FOREIGN CURRENCY DIRECTIVE (As reaffirmed effective January 26, 2021)1. The Committee directs the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions, for the System Open Market Account, in accordance with the provisions of the Authorization for Foreign Currency Operations (the "Authorization") and subject to the limits in this Directive.2. The Committee directs the Selected Bank to execute warehousing transactions, if so requested by the United States Treasury and if approved by the Foreign Currency Subcommittee (the "Subcommittee"), subject to the limitation that the outstanding balance of United States dollars provided to the United States Treasury as a result of these transactions not at any time exceed $5 billion.3. The Committee directs the Selected Bank to maintain, for the System Open Market Account:A. Reciprocal currency arrangements with the following foreign central banks:B. Standing dollar liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National BankC. Temporary dollar liquidity swap arrangements with the following foreign central banks:Reserve Bank of Australia National Bank of Denmark Reserve Bank of New Zealand Bank of Norway Bank of Sweden Central Bank of Brazil Bank of Mexico Bank of Korea Monetary Authority of SingaporeD. Standing foreign currency liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National Bank4. The Committee directs the Selected Bank to hold and to invest foreign currencies in the portfolio in accordance with the provisions of paragraph 7 of the Authorization.5. The Committee directs the Selected Bank to report to the Committee, at each regular meeting of the Committee, on transactions undertaken pursuant to paragraphs 1 and 6 of the Authorization. The Selected Bank is also directed to provide quarterly reports to the Committee regarding the management of the foreign currency holdings pursuant to paragraph 7 of the Authorization.6. The Committee directs the Selected Bank to conduct testing of transactions for the purpose of operational readiness in accordance with the provisions of paragraph 9 of the Authorization.By unanimous vote, the Committee reaffirmed its Program for Security of FOMC Information with minor technical changes.In the Committee's annual reconsideration of the Statement on Longer-Run Goals and Monetary Policy Strategy, all participants supported the statement as written, and the Committee voted unanimously to reaffirm without revision.STATEMENT ON LONGER-RUN GOALS AND MONETARY POLICY STRATEGY (As reaffirmed effective January 26, 2021)The Federal Open Market Committee (FOMC) is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.Employment, inflation, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays an important role in stabilizing the economy in response to these disturbances. The Committee's primary means of adjusting the stance of monetary policy is through changes in the target range for the federal funds rate. The Committee judges that the level of the federal funds rate consistent with maximum employment and price stability over the longer run has declined relative to its historical average. Therefore, the federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past. Owing in part to the proximity of interest rates to the effective lower bound, the Committee judges that downward risks to employment and inflation have increased. The Committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals.The maximum level of employment is a broad-based and inclusive goal that is not directly measurable and changes over time owing largely to nonmonetary factors that affect the structure and dynamics of the labor market. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the shortfalls of employment from its maximum level, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments.The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.Monetary policy actions tend to influence economic activity, employment, and prices with a lag. In setting monetary policy, the Committee seeks over time to mitigate shortfalls of employment from the Committee's assessment of its maximum level and deviations of inflation from its longer-run goal. Moreover, sustainably achieving maximum employment and price stability depends on a stable financial system. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.The Committee's employment and inflation objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it takes into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.The Committee intends to review these principles and to make adjustments as appropriate at its annual organizational meeting each January, and to undertake roughly every 5 years a thorough public review of its monetary policy strategy, tools, and communication practices.Developments in Financial Markets and Open Market Operations The manager turned first to a discussion of financial market developments. The evolving outlooks for the path of the virus and for fiscal policy were the main drivers of financial markets over the intermeeting period. Progress on vaccinations had been slower than expected, and the near-term trajectory of the pandemic worsened, weighing on economic activity. However, even with the appearance of new strains of the virus, market confidence in the ultimate efficacy of the vaccination efforts seemed to remain high. The emergence of a narrow Democratic majority in the Senate bolstered investor expectations for additional fiscal stimulus, prompting upward revisions to forecasts for economic growth this year. In the Open Market Desk Survey of Primary Dealers, the median 2021 gross domestic product (GDP) growth forecast rose about 1 percentage point.Against this backdrop, longer-term Treasury yields rose notably over the period. Longer-dated real yields were lifted by expectations for improved growth and increased Treasury issuance, but remained deeply negative. Measures of inflation compensation increased over the period, with the five-year, five-year-forward measure rising to a level of around 2 percent. Overall financial conditions eased further, on net, as the recent rally in risk assets continued. Gains in U.S. equities again centered on cyclical sectors and smaller-capitalization firms most sensitive to growth. Credit spreads narrowed further, especially for riskier borrowers.Expectations for the path of the target federal funds rate over the next several years, as implied by interest rate futures and by the Desk Survey of Primary Dealers and Survey of Market Participants, were relatively little changed from December. The stability in near-term policy rate expectations amid an improving growth outlook appeared consistent with the Committee's new framework and forward interest rate guidance. Although the median Desk survey respondent continued to expect 12‑month personal consumption expenditure (PCE) inflation of 2.3 percent when the FOMC first lifts the target range, the median expectation for the unemployment rate prevailing at that time was modestly lower than in December. The Desk survey results indicated that a majority of market participants anticipated that the pace of net asset purchases would remain stable for the remainder of the year and slow around the first quarter of 2022.The manager next discussed conditions in funding markets. Over the year-end, overnight secured and unsecured rates were little changed at rates just below the interest on excess reserves (IOER) rate even as financial firms managed their balance sheets for the reporting date. Going forward, reserves were projected to rise rapidly through the summer, reflecting ongoing Federal Reserve asset purchases as well as expected declines in balances held in the Treasury General Account. Market pricing suggested that the effective federal funds rate was expected to decline modestly through the second quarter. Even if more notable downward pressure on money market rates emerged, the manager anticipated that the Federal Reserve's tools, including the IOER rate and overnight reverse repurchase agreement facility, would continue to provide effective control over the federal funds rate and other overnight money market rates.Finally, the manager discussed Desk operations. A range of indicators suggested that both fixed-income and funding markets continued to function smoothly over the period. The manager noted that, in the coming period, the Desk anticipated implementing two adjustments to continue to normalize operations. First, given the sustained stability in term repurchase markets, the Desk proposed discontinuing the weekly one-month term repurchase operations, beginning in mid-February. In addition, the Desk planned to reduce the frequency of agency commercial mortgage-backed securities (CMBS) operations in light of the sustained improvement in market conditions for these securities.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The COVID‑19 pandemic and the measures undertaken to contain its spread continued to affect economic activity in the United States and abroad. The information available at the time of the January 26–27 meeting suggested that U.S. real GDP had continued to advance in the fourth quarter of 2020, albeit at a pace that was markedly slower than the rapid rate seen in the third quarter, while the level of real GDP had not yet returned to the level seen before the onset of the pandemic. Labor market conditions deteriorated, on balance, in December, and employment continued to be well below its level at the start of 2020. Consumer price inflation through November—as measured by the 12‑month percentage change in the PCE price index—remained considerably lower than the rates seen in early 2020.Total nonfarm payroll employment fell in December, with especially sharp declines in the leisure and hospitality sector. As of December, payroll employment had retraced a little more than half of the losses seen at the onset of the pandemic. The unemployment rate held steady at 6.7 percent in December. The unemployment rate for African Americans declined and the Hispanic unemployment rate rose; both rates remained well above the national average. However, the Asian unemployment rate moved below the national average in December. Both the labor force participation rate and employment-to-population ratio were unchanged in December. Initial claims for unemployment insurance in mid-January were higher than their early December level. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP indicated that the four-week average change in private employment in mid-January was slightly lower than it had been in early December; however, the most recent week-to-week changes in this measure of payrolls had been highly volatile.Average hourly earnings for all employees rose 5.1 percent over the 12 months ending in December, a gain that was noticeably higher than the measure's year‑earlier 12‑month change. The 12‑month change in average hourly earnings continued to be dominated by changes in the composition of the workforce, with the concentration of job losses among lower-wage workers over the pandemic period resulting in outsized increases in this measure of earnings that were not indicative of tight labor market conditions. By contrast, a staff measure of the 12‑month change in the median wage derived from the ADP data—a measure likely to have been less affected by changes in workforce composition—was 3-1/2 percent in December and remained well below its pre‑pandemic pace.Total PCE price inflation was 1.1 percent over the 12 months ending in November and continued to be held down by relatively weak aggregate demand and the declines in consumer energy prices seen over the first part of 2020. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 1.4 percent over the 12 months ending in November, while the trimmed mean measure of 12‑month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.7 percent in November. In December, the 12‑month change in the consumer price index (CPI) was 1.4 percent, while core CPI inflation was 1.6 percent over the same period. The latest readings on survey-based measures of longer-run inflation expectations ticked higher. In the first part of January, the University of Michigan Surveys of Consumers measure for the next 5 to 10 years moved back up to its late‑summer level, while in December, the 3‑year‑ahead measure of inflation expectations produced by the Federal Reserve Bank of New York moved back up to its August level.Real PCE fell in November, and available indicators—including the components of the nominal retail sales data used to estimate PCE—pointed to a further decline in December. Housing starts and construction permits moved up in November and December and finished the year well above their pre‑pandemic levels. Although home sales turned down in November, the decline appeared to reflect limited availability of homes for sale rather than weakening demand.Available indicators pointed to a strong increase in investment in equipment and intangibles in the fourth quarter of 2020, as this component of capital spending recovered from its sharp decline over the first half of the year. Likewise, drilling investment appeared to have turned up sharply, albeit from a low level, as oil prices moved higher. By contrast, investment in nonresidential structures outside of the drilling and mining sector appeared to have declined further in the fourth quarter and had likely been restrained by firms' continued hesitation to commit to projects with lengthy times to completion and uncertain future returns.Industrial production advanced further in the fourth quarter, led by a solid gain in manufacturing output, but had not yet overtaken its pre‑pandemic level. The low level of export demand since the onset of the pandemic had likely continued to restrain the recovery in the manufacturing sector; in addition, production of motor vehicles and parts was a small drag on manufacturing output in the fourth quarter as automotive producers appeared to have had difficulty getting assemblies fully under way for the new model year.Total real government purchases appeared to have fallen further in the fourth quarter, though at a slower pace than in the third quarter. Available data suggested that real federal purchases had posted a modest gain, as an increase in defense purchases offset a reduction in nondefense purchases; however, indicators of real state and local purchases, including state and local government employment, pointed to a fourth-quarter decline similar in size to what had been seen in the third quarter.The nominal U.S. international trade deficit widened further in November. Both imports and exports continued to rebound from their collapse in the first half of the year. Goods imports rose in November to a level well above that of the previous January, with gains in most major categories. Although exports also grew in November, they had not yet recovered to their January 2020 level. Services trade continued a gradual rise but remained depressed, driven by the continued suspension of most international travel. Taken together, these data suggested that net exports made a significant negative contribution to real GDP growth in the fourth quarter.Recent data pointed to a sharp slowing in foreign economic growth in the fourth quarter, after a strong rebound in the third quarter. Amid a further intensification of the pandemic, many foreign governments tightened social-distancing restrictions. In a few countries, the emergence of new and more contagious virus strains was accompanied by a surge in COVID-19 cases and deaths. The increased virus spread and restrictions appeared to take a toll on foreign economic activity, particularly in Europe. The global slowdown was most notable for services, with further declines in purchasing managers indexes for this sector through January in many advanced foreign economies. By contrast, manufacturing output in both advanced and emerging foreign economies continued to expand at a solid pace, supported by resilient demand for durable goods, high-tech goods, and medical supplies. Amid the generally weak economic situation, inflationary pressures remained subdued in most foreign economies.Staff Review of the Financial Situation Investor sentiment improved and risk asset prices moved higher over the intermeeting period on greater prospects for additional fiscal stimulus. Domestic and foreign equity prices increased notably, and spreads on corporate and municipal bonds narrowed. The nominal Treasury yield curve steepened, partly reflecting an increase in inflation compensation. Market-based financing conditions remained accommodative, while bank lending conditions continued to be tight. However, a smaller net share of banks tightened lending standards than in previous quarters.A straight read of overnight index swap (OIS) quotes suggested that the expected path of the federal funds rate beyond mid-2023 rose moderately over the intermeeting period, with the increases reportedly associated largely with greater investor optimism regarding the expected speed of the economic recovery. OIS quotes suggested that the expected policy rate would remain below 25 basis points until the third quarter of 2023, little changed from the time of the December meeting.The yield on 2-year nominal Treasury securities was little changed over the intermeeting period, while the 10-year yield rose notably. Most of the steepening of the Treasury yield curve occurred following the outcome of the Georgia runoff elections, which reportedly bolstered market participants' expectations for additional fiscal stimulus. The FOMC's updated guidance around asset purchases was seen as broadly in line with expectations and did not elicit noticeable financial market reaction. Measures of inflation compensation based on Treasury Inflation-Protected Securities increased moderately, on net, continuing the upward trend observed over recent months, with the increase over the intermeeting period reportedly reflecting greater prospects for additional fiscal stimulus and an associated improvement in the longer-run economic outlook.Broad stock price indexes increased, on net, over the intermeeting period, boosted by gains in the share prices of banks and companies in more cyclically sensitive sectors, reportedly reflecting, in part, increased expectations of fiscal stimulus. One-month option-implied volatility on the S&P 500—the VIX—was little changed, on net, remaining modestly elevated relative to its range over the past several years. Consistent with the optimism driving stock prices, spreads on corporate bond yields over comparable-maturity Treasury yields narrowed somewhat. Spreads on municipal bond yields narrowed notably in January, reportedly reflecting increased expectations of additional fiscal stimulus and aid to state and local governments.Conditions in short-term funding markets remained stable over the intermeeting period, including over the year-end. Spreads for commercial paper and negotiable certificates of deposit across tenors were largely unchanged at historically low levels. Commercial paper outstanding declined somewhat in late December but quickly rebounded in early January to the levels observed before year-end. Amid stable market conditions, there was no take-up at the Commercial Paper Funding Facility or the Money Market Mutual Fund Liquidity Facility over the intermeeting period. Assets under management (AUM) of government money market funds (MMFs) remained stable over the intermeeting period. AUM of prime MMFs continued to decline, reaching the lowest level since late 2018, likely reflecting the compressed net yield advantage for prime funds relative to yields for government funds. The net yields of both prime and government MMFs remained near historically low levels.The effective federal funds rate and the Secured Overnight Financing Rate were little changed, averaging 9 basis points and 8 basis points, respectively, over the intermeeting period. There continued to be no participation in the Fed's repurchase agreement (repo) operations, and participation in the Fed's reverse repo facility was minimal.In foreign financial markets, the prospect of additional U.S. fiscal stimulus and the passage of key risk events such as the Brexit trade agreement largely outweighed investor concerns around new virus strains and the sluggish global vaccine rollout. On balance, foreign equity prices increased moderately, with notable outperformance in some Asian indexes, and capital inflows into mutual funds dedicated to emerging markets continued at a robust pace. Longer-term sovereign yields in most advanced foreign economies rose slightly on improved investor sentiment even while several major central banks reaffirmed their commitment to continue or possibly expand accommodative policies. The broad dollar index was little changed, on net, over the intermeeting period, while the Chinese renminbi appreciated notably against the dollar as data showed a robust economic recovery in China. Dollar funding conditions were generally stable around year-end.Financing conditions in capital markets remained broadly accommodative, supported by low interest rates and high equity valuations. Gross corporate bond issuance was fairly strong in November and December, and seasoned and initial public offerings in the equity markets were robust. Gross institutional leveraged loan issuance was also strong in December, as issuance volumes excluding refinancing topped their averages for previous months of 2020 and were above those observed during the same period of 2019.Commercial and industrial (C&I) loan balances at banks continued to decline in December, albeit at a slower pace than in the fall. C&I loans declined in the fourth quarter because of weak origination activity, loan forgiveness at the Paycheck Protection Program, and continued repayments of bank debt. In the January Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), banks, on net, reported weaker demand and tightened lending standards for C&I loans, with notable differences in reported changes across bank sizes. Large banks reported having eased standards to large and middle-market firms, while, on net, banks of all sizes reported having tightened standards to small firms. However, a smaller net percentage of banks tightened lending standards to firms of all sizes than in previous quarters.The credit quality of nonfinancial corporations remained stable in recent months after deteriorating substantially for several months following the onset of the pandemic. The volume of nonfinancial corporate bond downgrades continued to slightly outpace upgrades in November and December, and the monthly volume of nonfinancial corporate bond defaults remained relatively low. Market indicators of future default expectations moved slightly lower, essentially returning to their pre-pandemic levels.Financing conditions for small businesses remained tight, but small business loan originations in November, the most recent month for which data were available, were at roughly the level seen a year earlier, likely supported by the refinancing of existing loans. Meanwhile, liquidity needs of small businesses remained high as businesses continued to operate at reduced capacity. Small business delinquency and default rates were little changed but remained elevated relative to the levels of recent years. Financing conditions in the municipal bond market remained generally accommodative over the intermeeting period, and the credit quality of municipal debt remained roughly stable.For commercial real estate (CRE) financed through capital markets, financing conditions remained generally accommodative, easing further over the intermeeting period. Spreads on agency CMBS ticked down, on net, and issuance remained elevated through December, although below its recent historical high in October. Risk spreads on triple-B non-agency CMBS declined, and spreads on triple-A non-agency CMBS stayed close to their historical lows. Issuance of non-agency CMBS remained somewhat below its pre-pandemic level. CRE bank loan growth remained weak in the fourth quarter amid depressed property transaction volumes. On net, in the January SLOOS, banks reported a further tightening of lending standards and further weakening in demand for CRE loans.Financing conditions in the residential mortgage market were little changed over the intermeeting period. Mortgage rates ticked up slightly but stayed near historically low levels, supporting strong loan origination activity. Credit remained broadly available to higher-score borrowers seeking conforming mortgages but tightened further, from already tight levels, for borrowers with lower credit scores and those seeking nonconforming mortgages. The January SLOOS suggested that for most types of residential mortgages, banks' lending standards remained unchanged, while loan demand was either little changed or somewhat stronger. Mortgage forbearance rates plateaued in December and early January after having gradually declined over the previous six months, and the rate of new delinquencies stayed at low, pre-pandemic levels.Financing conditions in consumer credit markets generally remained accommodative for borrowers with strong credit scores but tight for those with subprime scores. Banks in the January SLOOS reported easing standards for all consumer loan types and experiencing weaker demand for auto loans and little-changed demand for other consumer loans. Conditions in the asset-backed securities market appeared supportive of lending. Credit card balances edged down further for both prime and nonprime borrowers, likely reflecting weak consumer spending. However, the volume of new cards and available credit continued to rise for both prime and nonprime borrowers. Interest rates on new credit card offers for nonprime borrowers stayed elevated, and financing conditions remained tight for those borrowers. Auto loan balances continued to increase solidly for prime and near-prime borrowers but declined further for subprime borrowers. Auto loan interest rates were about flat over the past few months and remained significantly below their pre-pandemic levels. Delinquency rates for nonprime auto and credit card borrowers ticked up, albeit from very low levels.The staff provided an update on its assessments of the stability of the financial system and, on balance, characterized the financial vulnerabilities of the U.S. financial system as notable. The staff assessed asset valuation pressures as elevated. In particular, corporate bond spreads had declined to pre-pandemic levels, which were at the lower ends of their historical distributions. In addition, measures of the equity risk premium declined further, returning to pre-pandemic levels. Prices for industrial and multifamily properties continued to grow through 2020 at about the same pace as in the past several years, while prices of office buildings and retail establishments started to fall. The staff assessed vulnerabilities associated with household and business borrowing as notable, reflecting increased leverage and decreased incomes and revenues in 2020. Small businesses were hit particularly hard. The staff judged that vulnerabilities stemming from financial leverage were moderate, noting that capital ratios at the largest bank holding companies rose over the course of last year; leverage among hedge funds was elevated but it did decline last spring for the most highly leveraged funds. The staff characterized vulnerabilities stemming from funding risks as moderate. Banks continued to maintain significant levels of high-quality liquid assets and stable sources of funding. In contrast, money market funds and open-ended mutual funds were characterized by significant vulnerabilities associated with liquidity transformation.Staff Economic Outlook The U.S. economic projection prepared by the staff for the January FOMC meeting implied a considerably stronger outlook for activity in 2021 relative to the December forecast. Although incoming data had been weaker than expected, the staff's January projection incorporated the effects of the stimulus in the recently enacted Consolidated Appropriations Act, 2021 (CAA), together with an assumption that an additional sizable tranche of fiscal support would be put into place in coming months. Taken together, these stimulus measures were expected to partly offset the substantial drag on aggregate demand that would result from the unwinding of the fiscal stimulus enacted in the spring of 2020. The staff's projection continued to anticipate that widespread vaccination would allow for an easing in social distancing in 2021. With the boost to growth from the reduction in social distancing assumed to be largely completed by the end of 2021, GDP growth was expected to step down over the remainder of the medium term. Even so, the staff continued to project that real GDP growth would outpace that of potential over this period, leading to a considerable further decline in the unemployment rate.The 12‑month changes in total and core PCE prices in coming months were projected to briefly move above 2 percent in the second quarter of 2021 as the unusually low observations from the spring of 2020 drop out of the 12-month calculation. Following these swings, inflation was expected to finish the year at just below 2 percent. Thereafter, inflation was projected to gradually edge up to 2 percent by the end of the medium term as labor and product markets tightened. With monetary policy assumed to remain accommodative, inflation was projected to moderately overshoot 2 percent for some time in the years beyond 2023.The staff viewed the possibility that a larger-than-anticipated fiscal package would be enacted in coming months as a modest upside risk to the baseline economic outlook. However, the further rise in COVID‑19 cases in the United States, coupled with developments such as the emergence of more-contagious strains of the virus in the United States and elsewhere, led the staff to continue to judge that the risks to the baseline projection were skewed to the downside and that the uncertainty around the forecast was elevated.Participants' Views on Current Conditions and the Economic Outlook Participants noted that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment had moderated in recent months, with weakness concentrated in the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing. Weaker demand and earlier declines in oil prices were holding down consumer price inflation. Overall financial conditions remained accommodative, in part reflecting the Federal Reserve's actions to support the economy and the flow of credit to U.S. households and businesses. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis would continue to weigh on economic activity, employment, and inflation and posed considerable risks to the economic outlook.Participants observed that the resurgence in COVID-19 infections and associated social-distancing measures were restraining activity in some sectors, particularly in industries such as travel and leisure and hospitality. Most participants expected that the stimulus provided by the passage of the CAA in December, the likelihood of additional fiscal support, and anticipated continued progress in vaccinations would lead to a sizable boost in economic activity. Even so, participants noted that economic activity and employment were currently well below levels consistent with achieving maximum employment.Participants commented on improved prospects for household spending over the course of the year, in part reflecting fiscal support. They saw progress on vaccinations as essential for supporting further gains in aggregate consumer spending and for the economic recovery more generally. In commenting on recent data for household spending, most participants discussed the composition of expenditures, with strong spending on many goods, especially durables, and weakness in spending on some services, especially in travel and in leisure and hospitality. The relative strength in consumer spending on goods was supported by fiscal programs such as federal stimulus payments and expanded unemployment benefits as well as by accommodative monetary policy. The weakness in services spending was largely attributed to the pandemic and associated social-distancing measures, which limited spending on services that depend heavily on in-person contact. Increased government transfers to households, combined with reduced outlays on some services, had contributed to a historically large increase in aggregate household savings last year. Participants also observed that residential investment and home sales remained robust; low interest rates were viewed as an important factor supporting the strength in housing activity.Most participants noted that the economic downturn had not fallen equally on all Americans and that those least able to shoulder the burden—in particular, lower-income and Black and Hispanic households—had been the hardest hit by the pandemic. Many participants stressed that sustained support from fiscal policy would help address the hardships faced by these groups and that monetary policy could also help by promoting the economy's return to maximum employment and price stability.In their remarks on the business sector, participants commented that business equipment investment had continued to show strength while nonresidential construction remained weak. Participants also discussed the recent strong performance of the manufacturing sector. Many discussed supply chain issues in manufacturing, including those associated with acquiring material inputs and pandemic-related worker shortages and absenteeism. Business contacts reported that firms in goods-producing industries, particularly larger firms and those in the durable goods or housing sectors, were adapting to the pandemic; in contrast, smaller firms and those in industries most adversely affected by the pandemic were finding it more difficult to adapt. Many participants stated that their business contacts were optimistic that continued progress on vaccinations, together with further fiscal support, would result in more improvement in overall business conditions. Several participants noted the increase in agricultural crop prices over 2020 and the associated improvement in farm revenues.As with overall economic activity, the pace of improvement in the labor market had slowed in recent months. Payroll employment fell in December, as continued job gains in many industries were outweighed by significant layoffs in industries where the resurgence of the virus had weighed heavily on activity. While labor market conditions had improved significantly, on balance, since the spring, some participants noted that if the sizable number of workers who reported having left the labor force since the beginning of the pandemic were to be counted as unemployed, the unemployment rate would be substantially higher. Participants judged that the current low level of labor force participation likely reflected a number of factors, including health concerns and additional childcare responsibilities. Over the medium term, participants expected strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy. However, participants observed that the economy was far from achieving the Committee's broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time.In their comments about inflation, participants noted that headline PCE price inflation in December, measured on a 12-month basis, was poised to come in well below the Committee's 2 percent longer-term objective. In the relatively near term, a number of participants suggested that there could be increases in the prices of some goods whose production has been subject to supply chain constraints, or soon could be; others anticipated that a possibly abrupt return to normal levels of activity could result in one-time increases in certain prices. Many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation, noting that changes in relative prices could temporarily raise measured inflation but would be unlikely to have a lasting effect. Some participants further observed that 12-month PCE inflation was likely to move somewhat above 2 percent for a brief period in the spring as the unusually low monthly observations from last spring roll out of the 12-month calculation. Outside of such near-term fluctuations, participants generally anticipated that inflation would move up along a trajectory consistent with achieving the Committee's objectives over time, supported by stronger economic activity, widespread vaccinations and the associated reduction in social distancing, and accommodative fiscal and monetary policy. Some participants pointed to the continued increase in market-based measures of inflation compensation from the very low levels recorded in the spring as consistent with the view that inflation was likely to move up gradually over time; others noted that survey-based measures were little changed, on net, over the year as a whole.Participants noted that overall financial conditions remained highly accommodative, in part reflecting investors' optimism about the economic outlook along with the accommodative stance of monetary policy and recent and expected future fiscal policy measures. However, a few participants remarked that credit conditions were relatively tight for borrowers with low credit scores and for some small and medium-sized businesses that rely on bank lending rather than capital markets to meet their financing needs.While generally acknowledging that the medium-term outlook for real GDP growth and employment had improved, participants continued to see the uncertainty surrounding that outlook as elevated. Participants agreed that the path of the economy depended significantly on the course of the virus and progress on vaccinations. Many participants remarked that the pandemic continued to pose considerable risks to the economic outlook, including risks associated with new virus strains, potential public resistance to vaccination, and potential difficulties in the production and distribution of vaccines. With regard to upside risks, some participants pointed to the possibility that fiscal policy could turn out to be more expansionary than anticipated, that households could display greater willingness to spend out of accumulated savings than expected, or that widespread vaccinations and easing of social distancing could result in a more rapid boost to spending and employment than anticipated. Participants generally viewed the risks to the outlook for inflation as having become more balanced than was the case over most of 2020, although most still viewed the risks as weighted to the downside. As an upside risk to inflation, several participants noted the potential for pandemic-related supply constraints to affect price inflation somewhat more than anticipated or for price increases among industries most adversely affected by the pandemic to be more pronounced than projected.A number of participants commented on issues related to financial stability. Several participants noted areas of strength. For example, the banking system had shown considerable resilience since the onset of the pandemic. Banks' capital positions had generally remained solid, and earnings were strong. In addition, results from the most recent stress tests indicated that the largest banks could withstand very stressed economic conditions. That said, a few participants stated that it would be important to stay vigilant to ensure that the banking system remained strong and resilient. In addition, several participants noted that the pandemic had highlighted structural vulnerabilities in other parts of the financial system. These included run-prone investment funds in short-term funding and credit markets as well as fragilities in Treasury market functioning; stresses stemming from these vulnerabilities had required substantial intervention by the Federal Reserve in the turbulent market conditions at the onset of the pandemic. A couple of participants commented that it would be important for the appropriate regulatory bodies to address these financial stability vulnerabilities. Regarding asset valuations, some participants commented that equity valuations had risen further, that initial public offering activity was elevated, or that valuations might have been affected by retail investors trading through electronic platforms. In addition, risk spreads on corporate bonds and loans were generally low, even with corporate indebtedness having risen to high levels. A few participants noted that some CRE in sectors that had been most directly affected by the pandemic—such as those involving retail establishments and hotels—faced the prospect of falling prices and increased stress.In their consideration of monetary policy at this meeting, participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time, thereby promoting the Committee's statutory goals of maximum employment and price stability. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis had continued to weigh on economic activity, employment, and inflation. Participants noted that as the pandemic had worsened across the country in recent months, the pace of the recovery had moderated, with weakness concentrated in the sectors most adversely affected by the pandemic. In contrast, participants remarked that the prospect of an effective vaccine program, the recently enacted fiscal support, and the potential for additional fiscal actions had led them to judge that the medium-term outlook had improved. That said, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook.In their discussion of the outlook for monetary policy, participants judged that maintaining a highly accommodative stance of policy was essential to foster further economic recovery and to achieve an average inflation rate of 2 percent over time. Participants noted that economic conditions were currently far from the Committee's longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved. Consequently, all participants supported maintaining the Committee's current settings and outcome-based guidance for the federal funds rate and the pace of asset purchases.Participants noted that the Committee's current guidance was well suited to the current environment because it describes how policy would respond based on the path of the economy. For example, if progress toward the Committee's goals proved slower than anticipated, the outcome-based guidance would convey the Committee's intention to respond by increasing monetary policy accommodation through maintaining the current level of the target range of the federal funds rate for longer and raising the expected path of the Federal Reserve's balance sheet. In addition, participants noted that the Committee's current outcome-based guidance for both the federal funds rate and balance sheet appeared to be well understood by the public. In that context, participants emphasized that it was important to abstract from temporary factors affecting inflation—such as low past levels of prices dropping out of measures of annual price changes or relative price increases in some sectors brought about by supply constraints or disruptions—in judging whether inflation was on track to moderately exceed 2 percent for some time.Participants noted that the increase in the Federal Reserve's balance sheet since last March had materially eased financial conditions and was providing substantial support to the economy. The Committee's guidance for asset purchases indicated that asset purchases would continue at least at the current pace until substantial further progress toward its employment and inflation goals had been achieved. With the economy still far from those goals, participants judged that it was likely to take some time for substantial further progress to be achieved. Various participants noted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of purchases.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. They noted that the pace of recovery in economic activity and employment had moderated in recent months, with weakness concentrated in sectors most adversely affected by the pandemic. Weaker demand and earlier declines in oil prices had been holding down consumer price inflation. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Members also stated that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. In addition, members agreed that the ongoing public health crisis had continued to weigh on economic activity, employment, and inflation and was posing considerable risks to the economic outlook.Members agreed that the pandemic continued to pose considerable risks to the outlook. Nonetheless, in light of the expected progress on vaccinations and the change in the outlook for fiscal policy, the medium-term prospects for the economy had improved enough that members decided that the reference in previous post-meeting statements to risks to the economic outlook over the medium term was no longer warranted.Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals. All members reaffirmed that, in accordance with the Committee's goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run and with inflation running persistently below this longer-run goal, they would aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. Members expected to maintain an accommodative stance of monetary policy until those outcomes were achieved.All members agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent, and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time.In addition, members agreed that it would be appropriate for the Federal Reserve to continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made toward the Committee's maximum-employment and price-stability goals. They judged that these asset purchases would help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook and that they would be prepared to adjust the stance of monetary policy as appropriate in the event that risks emerged that could impede the attainment of the Committee's goals. Members also agreed that, in assessing the appropriate stance of monetary policy, they would take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective January 28, 2021, the Federal Open Market Committee directs the Desk to:The vote also encompassed approval of the statement below for release at 2:00 p.m.:"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective January 28, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, March 16–17, 2021. The meeting adjourned at 10:25 a.m. on January 27, 2021.Notation Vote By notation vote completed on January 5, 2021, the Committee unanimously approved the minutes of the Committee meeting held on December 15–16, 2020. _______________________ James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended through the discussion of developments in financial markets and open market operations. Return to text3. Committee organizational documents are available at www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. Return to text1. In general, as specified in Article IV, each member of the IMF undertakes to collaborate with the IMF and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. These obligations include seeking to direct the member's economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability. These obligations also include avoiding manipulating exchange rates or the international monetary system in such a way that would impede effective balance of payments adjustment or to give an unfair competitive advantage over other members. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2021 01 27Consumer Resources March 16-17, 2021A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, March 16, 2021, at 11:00 a.m. and continued on Wednesday, March 17, 2021, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Raphael W. Bostic Michelle W. Bowman Lael Brainard Richard H. Clarida Mary C. Daly Charles L. Evans Randal K. Quarles Christopher J. WallerJames Bullard, Esther L. George, Loretta J. Mester, and Eric Rosengren, Alternate Members of the Federal Open Market CommitteePatrick Harker, Robert S. Kaplan, and Neel Kashkari, Presidents of the Federal Reserve Banks of Philadelphia, Dallas, and Minneapolis, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, Kartik B. Athreya, Brian M. Doyle, Rochelle M. Edge, Eric M. Engen, Sylvain Leduc, Anna Paulson, and William Wascher, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountPatricia Zobel, Deputy Manager, System Open Market AccountMatthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsMargie Shanks, Deputy Secretary, Office of the Secretary, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Division of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Division of Board Members, Board of GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis, and Chiara Scotti, Special Advisers to the Board, Division of Board Members, Board of GovernorsElizabeth Klee, Senior Associate Director, Division of Financial Stability, Board of Governors; David E. Lebow and Michael G. Palumbo, Senior Associate Directors, Division of Research and Statistics, Board of GovernorsDon H. Kim and Ellen E. Meade, Senior Advisers, Division of Monetary Affairs, Board of GovernorsGlenn Follette, Associate Director, Division of Research and Statistics, Board of Governors; David López-Salido, Associate Director, Division of Monetary Affairs, Board of GovernorsStephanie E. Curcuru, Deputy Associate Director, Division of International Finance, Board of Governors; Christopher J. Gust, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Norman J. Morin and Paul A. Smith, Deputy Associate Directors, Division of Research and Statistics, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsJennifer Gallagher, Special Assistant to the Board, Division of Board Members, Board of GovernorsBrian J. Bonis, Michiel De Pooter, and Zeynep Senyuz,2 Assistant Directors, Division of Monetary Affairs, Board of GovernorsAlyssa G. Anderson,2 Section Chief, Division of Monetary Affairs, Board of Governors; Penelope A. Beattie,2 Section Chief, Office of the Secretary, Board of GovernorsMark A. Carlson, Senior Economic Project Manager, Division of Monetary Affairs, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Sebastian Infante, and Ander Perez-Orive, Principal Economists, Division of Monetary Affairs, Board of GovernorsRandall A. Williams, Lead Information Manager, Division of Monetary Affairs, Board of GovernorsAnthony Sarver,2 Senior Financial Institution Policy Analyst, Division of Monetary Affairs, Board of GovernorsEllen J. Bromagen, First Vice President, Federal Reserve Bank of ChicagoMichael Dotsey, Executive Vice President, Federal Reserve Bank of PhiladelphiaAnne Baum, Edward S. Knotek II, Giovanni Olivei, Paula Tkac, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of New York, Cleveland, Boston, Atlanta, and Minneapolis, respectivelyKathryn B. Chen2 and Jonathan P. McCarthy, Vice Presidents, Federal Reserve Bank of New YorkBrett Rose,2 Assistant Vice President, Federal Reserve Bank of New YorkAnthony Murphy, Senior Economic Policy Advisor, Federal Reserve Bank of DallasBrent Bundick, Research and Policy Advisor, Federal Reserve Bank of Kansas CityMichael Koslow,2 Markets Officer, Federal Reserve Bank of New YorkFernando M. Martin, Research Officer, Federal Reserve Bank of St. LouisWilliam G. O'Boyle,2 Policy and Markets Manager, Federal Reserve Bank of New YorkMichael Junho Lee,2 Economist, Federal Reserve Bank of New YorkAction to Adopt Changes to the Committee's Rules Regarding Availability of Information By unanimous vote, the Committee approved a final rule that revises its Rules Regarding Availability of Information, which are the Committee's Freedom of Information Act (FOIA) rules. The revised FOIA rules, which include a range of minor and technical updates, will become effective 30 days after the forthcoming publication of the final rule in the Federal Register.Developments in Financial Markets and Open Market Operations The manager turned first to a discussion of financial market developments. In the United States, the trend toward higher longer-term yields observed in recent months accelerated over the intermeeting period, and far-forward real rates based on Treasury Inflation-Protected Securities (TIPS) rose considerably. Market participants highlighted an improving economic outlook, bolstered by passage of the American Rescue Plan (ARP) and progress on vaccinations, as underlying the increase in yields. Model- and survey-based estimates suggested that a significant portion of the increase in yields was associated with an increase in term premiums. Higher term premiums could reflect the outlook for more expansive fiscal policy and an associated upward revision in the expected path for Treasury debt outstanding. Increased uncertainty over the outlook for longer-term interest rates as well as technical factors may also have contributed to the rise in term premiums. The Treasury market functioned well over most of the period, although measures of market liquidity deteriorated somewhat toward the end of February. Conditions gradually improved, although some measures of market liquidity had not fully returned to earlier levels.Rates implied by interest rate futures maturing over the next several years rose notably over the intermeeting period, reportedly reflecting a reassessment by market participants of the expected path of the target range for the federal funds rate. Since the January meeting, the date of the first increase in the target range for the federal funds rate implied by a straight read of market pricing moved notably earlier to the first quarter of 2023, and the implied target rate at the end of 2023 rose around 50 basis points. However, responses to the Open Market Desk surveys suggested more modest changes to policy rate expectations. The probability-weighted mean survey expectation for the target rate at the end of 2023 rose only around 5 basis points.Expectations for economic conditions at the time of the first increase in the target range, as measured by the Desk surveys, appeared to remain broadly consistent with the Committee's policy framework and forward guidance. Expectations from the Desk surveys for the path of asset purchases were little changed. Contacts noted that these expectations have been held steady by policymaker communications emphasizing both the need to see realized progress toward the Committee's goals and the intent to communicate well in advance of the time when progress could be judged substantial enough to warrant a change in the pace of purchases.Alongside the rise in U.S. yields, broad U.S. equity price indexes increased moderately, with the largest gains in cyclically sensitive sectors. The rise in U.S. yields was also accompanied by increases in sovereign yields in other advanced economies. Some central banks responded to these yield increases with adjustments to operations; others suggested that the rising yields reflected improvements in the outlook.The deputy manager discussed the evolution of the Federal Reserve's balance sheet and related developments in money markets. Reserve balances rose more than $400 billion, on net, over the intermeeting period to $3.7 trillion, while Treasury bills outstanding decreased more than $200 billion. Against this backdrop, the effective federal funds rate softened modestly, while repurchase agreement (repo) rates declined to a greater extent. Moreover, market participants projected that reserves would grow at a historically rapid pace in coming months, reflecting continued expansion of the Federal Reserve's balance sheet along with a projected drawdown in the balances maintained in the Treasury General Account. Market contacts suggested that continued rapid expansion of reserves could put further downward pressure on money market rates. The deputy manager noted that the earliest and most pronounced pressure was likely to be observed in overnight secured financing markets, and there could be increasing usage of the overnight reverse repurchase agreement (ON RRP) facility.In light of the potential for expanded use of the ON RRP facility, the staff had conducted a review to ensure that the terms of the facility and its counterparty base were well positioned to continue to support effective policy implementation. By offering a broad range of money market lenders an outside investment option, the ON RRP facility enhances lenders' bargaining power in negotiating rates on short-term private investments and thus helps establish a floor on overnight money market rates. The facility can also alleviate downward pressure on overnight rates associated with reserve growth by broadening the range of liabilities that support the Federal Reserve's balance sheet expansion. The review recommended raising the ON RRP per-counterparty limit from $30 billion to $80 billion. The $30 billion limit had been established a number of years ago, and the amount of credit intermediated through money markets had grown substantially since then. The increase in the limit to $80 billion would restore the capacity of the facility relative to the aggregate size of money fund counterparties to roughly the level in place when the facility was established. The staff would also monitor money market conditions on an ongoing basis to assess whether any additional adjustments were needed to the ON RRP facility terms.In addition to changes to the ON RRP parameters, the deputy manager also noted that the Federal Reserve could consider adjusting its administered rates if undue downward pressure on overnight rates emerged. Responses to the Desk surveys indicated that many market participants anticipated adjustments to the interest on excess reserves rate and the ON RRP rate at or before the June meeting. Finally, in light of more normal conditions in agency commercial mortgage-backed securities (CMBS) markets, the Desk planned to conduct agency CMBS operations as needed to sustain smooth market functioning but would cease regularly scheduled CMBS operations.In their discussion following the Desk briefings, participants noted that the ON RRP facility had been very effective in establishing a firm floor for the federal funds rate and supporting monetary policy implementation. Participants commented that the facility would continue to be an important part of the monetary policy implementation framework going forward, particularly in coming months with reserve levels projected to rise rapidly. Participants broadly supported the proposed increase in the counterparty limit, and a few participants also noted that they would support removing the limit altogether. A few participants suggested that some type of dynamic or differential limit could be considered in the future to enable the ON RRP facility to adapt more readily to market developments. A few participants noted that the concerns at the time the facility was established about possible adverse effects of the ON RRP facility on financial stability and the structure of money markets had not materialized. Indeed, over the spring of 2020, the facility played an important role in helping stabilize money market conditions. In light of the potential for greater use of the ON RRP facility going forward in connection with the expansion of the Federal Reserve's balance sheet and associated downward pressure on overnight rates, a couple of participants noted that it might be useful to review lessons learned regarding the ON RRP facility since its inception.Following the discussion, the Chair noted the potential for downward pressure on money market rates and suggested that, should undue downward pressure on overnight rates emerge, it might be appropriate to implement adjustments to administered rates at upcoming meetings or even between meetings to support effective policy implementation and ensure that the federal funds rate remains well within the target range.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The COVID‑19 pandemic and the measures undertaken to contain its spread continued to affect economic activity in the United States and abroad. The information available at the time of the March 16–17 meeting suggested that U.S. real gross domestic product (GDP) was expanding in the first quarter of 2021 at a pace that was faster than in the fourth quarter of last year, although the level of real GDP had likely not yet returned to the level seen before the onset of the pandemic. Labor market conditions improved in January and February, but employment was still well below its level at the start of 2020. Consumer price inflation through January—as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE)—remained well below 2 percent.Total nonfarm payroll employment increased solidly over January and February after softening at the end of last year. As of February, payroll employment had retraced somewhat more than half of the losses seen since the onset of the pandemic. The unemployment rate fell to 6.2 percent in February. The unemployment rates for Hispanics and Asians declined, on balance, over January and February, while the unemployment rate for African Americans was unchanged on net; the rates for both African Americans and Hispanics remained well above the national average. Even though the labor force participation rate edged down, the employment-to-population ratio moved up somewhat over January and February; both measures remained below their pre-pandemic levels. Initial claims for unemployment insurance in early March were at their lowest level since November of last year. Weekly estimates of private-sector payrolls constructed by Federal Reserve Board staff using data provided by the payroll processor ADP indicated that the four-week average increase in private employment at the end of February was about the same as it had been in the middle of the month, when the Bureau of Labor Statistics collects payroll employment data.Average hourly earnings for all employees rose 5.3 percent over the 12 months ending in February, and labor compensation per hour in the business sector increased 6.6 percent over the four quarters of 2020. The gains in both these measures, however, continued to be dominated by changes in the composition of the workforce. In particular, the concentration of job losses among lower-wage workers since early last year had resulted in outsized increases in average hourly earnings and compensation per hour that were not indicative of tight labor market conditions. By contrast, the employment cost index of total hourly compensation in the private sector rose 2.6 percent over the 12 months of last year, and a staff estimate of the 12‑month change in the median wage derived from the ADP data was 3.2 percent in January. These measures are likely to have been less affected by changes in workforce composition, and they were rising more slowly than their pre-pandemic pace.Total PCE price inflation was 1.5 percent over the 12 months ending in January and continued to be held down by slack in resource utilization. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, also was 1.5 percent over the 12 months ending in January, while the trimmed mean measure of 12‑month PCE inflation constructed by the Federal Reserve Bank of Dallas was 1.7 percent in January. In February, the 12‑month change in the consumer price index (CPI) was 1.7 percent, while core CPI inflation was 1.3 percent over the same period. The latest readings on survey-based measures of longer-run inflation expectations were little changed on balance. In early March, the University of Michigan Surveys of Consumers preliminary measure for the next 5 to 10 years was the same as in the previous two months, while in February, the 3‑year‑ahead measure of inflation expectations produced by the Federal Reserve Bank of New York was essentially unchanged from its January level. The Survey of Professional Forecasters measure of PCE price inflation over the next 10 years edged up in the first quarter, returning to its pre-pandemic level. A staff index of common inflation expectations, which summarizes the co‑movement of a wide variety of inflation expectations measures, was at about the same level in the fourth quarter of last year as in the third quarter.Consumer spending appeared to be increasing in the first quarter at a pace considerably faster, on balance, than in the fourth quarter of last year. Real PCE expanded strongly in January after declining over the preceding two months, with spending likely boosted by federal stimulus payments sent out in early January. The components of the nominal retail sales data used by the Bureau of Economic Analysis to estimate PCE pointed to a step-down in spending in February, but revised data for the previous month suggested an even stronger gain in January. Spending in March was expected to be boosted by additional federal stimulus payments from the ARP, which started to be distributed around the middle of the month. In addition, the personal saving rate jumped to an even higher level in January, and ongoing gains in labor earnings along with further fiscal support pointed to additional increases in accumulated household savings. Moreover, the preliminary reading of consumer sentiment from the Michigan survey moved up notably in early March to its highest level over the past year, reportedly reflecting the growing number of vaccinations and the enactment of the ARP, although consumer sentiment remained below its levels from just before the onset of the pandemic.Construction of single-family homes and home sales remained well above their pre-pandemic levels. However, the incoming data for this sector were mixed. Starts of single-family homes moved down notably over January and February, in part likely reflecting severe winter weather in February. Starts of multifamily units also fell in February but by less than the strong increase seen in January. Construction permits for single-family homes moved down, on net, over January and February, pointing to some slowing in construction in coming months. Sales of both new and existing homes increased further in January, and home prices continued to rise briskly.Business investment in equipment and intangibles was continuing to increase in the first quarter after rising appreciably in the fourth quarter of last year. Nominal shipments of nondefense capital goods excluding aircraft expanded strongly in January, and rising orders for these goods pointed to further gains in business equipment spending in coming months. Business investment in the drilling and mining sector appeared to be increasing further after turning up sharply in the fourth quarter, as crude oil and natural gas rigs in operation—an indicator of drilling investment—continued to rise through early March with oil prices moving higher. Nominal nonresidential construction spending rose somewhat in January, but investment in nonresidential structures outside of the drilling and mining sector looked to remain weak in the current quarter after declining further in the fourth quarter, reflecting continued hesitation by businesses to commit to building projects with lengthy times to completion and uncertain future returns.Industrial production continued to rise solidly in January but then fell markedly in February, largely reflecting declines in manufacturing and mining sector output caused by severe winter weather in the south central region of the country in the middle of that month. Along with the severe weather, a cutback in the production of motor vehicles and parts also reflected a global shortage of semiconductors. New orders indexes in national and regional manufacturing surveys pointed toward solid increases in factory output in the coming months, although reports of shortages in materials and labor, as well as bottlenecks in transportation, signaled some potential restraints on the pace of the manufacturing recovery.Total real government purchases appeared to be rising in the first quarter after edging down in the fourth quarter. Although data through February indicated that defense spending was moving down, a likely bounceback in nondefense spending was expected to lift total federal purchases. State and local government purchases looked to be increasing, as the payrolls of these governments expanded, on net, over January and February, and nominal state and local construction spending increased solidly in January. Moreover, additional federal support for state and local governments included in the ARP, along with an improved outlook for state and local tax revenues, pointed to further notable increases in state and local purchases.Data for December and January showed a narrower nominal U.S. international trade deficit than in November. Both imports and exports continued to rebound from their collapse in the first half of last year. Goods imports in January were much higher than a year earlier, with continued gains in most categories. Nominal goods exports in January nearly recovered to their level from a year earlier, with particular strength in exports of capital goods and industrial supplies. Services imports and exports remained depressed, weighed down by the continued suspension of most international travel.Recent data pointed to a slowdown in economic activity across foreign economies around the turn of the year, as tight social-distancing restrictions were imposed to rein in a new wave of COVID-19 infections in various parts of the world, most notably in Europe and Latin America. Even so, economies appeared to be better adapted to operating under restrictions than during previous waves of infections. Manufacturing activity continued to generally outperform activity in the services sector, and manufactured exports from China and some other Asian economies remained strong, especially to the United States. Inflation rebounded in many foreign economies, reflecting rising energy prices and other temporary factors. However, underlying inflationary pressures remained subdued.Staff Review of the Financial Situation Investors appeared to have become more optimistic about the economic outlook over the intermeeting period against the backdrop of progress on COVID-19 vaccinations, signs of stronger domestic spending, and additional fiscal stimulus. The nominal Treasury yield curve steepened markedly, largely because of increases in longer-term real yields, although measures of inflation compensation also increased further. Despite the spikes in equity market volatility early in the intermeeting period, spurred by heavy trading concentrated in a few specific stocks and subsequent concerns over the rapid rise in longer-term interest rates, broad equity price indexes rose on net. Consistent with the stronger outlook, spreads on high-yield corporate bonds narrowed. Financing conditions for businesses with access to capital markets and households with high credit scores remained broadly accommodative, but conditions stayed tight for other borrowers.The Treasury yield curve steepened over the intermeeting period, with 5- and 10-year yields rising markedly. Measures of inflation compensation increased moderately, on net, continuing the trend observed over recent months. However, in contrast to recent months, most of the recent increase in longer-term Treasury yields was accounted for by higher TIPS-implied real yields. Market participants attributed the increases in longer-term yields in part to increased investor optimism about the economic outlook and expectations of higher Treasury debt issuance. On February 25, yields rose especially sharply. Market depth became thin, and bid-ask spreads widened, but Treasury market liquidity gradually recovered over the following days. Swaption-implied volatilities of longer-term interest rates rose notably.The expected path for the federal funds rate over the next few years, as implied by a straight read of overnight index swap quotes, rose substantially since the previous FOMC meeting and moved above 25 basis points in the first quarter of 2023, about three quarters sooner than expected at the time of the January meeting.Broad stock price indexes increased, on net, over the intermeeting period, consistent with increased investor optimism about the economic outlook and the enactment of the ARP. Stocks in cyclically sensitive industries such as energy, banking, and small caps recorded sizable gains, while other sectors experienced mixed performance. One-month option-implied volatility on the S&P 500—the VIX—fluctuated over a wide range during the intermeeting period but moved lower on balance. Spreads of corporate bond yields over comparable-maturity Treasury yields were roughly unchanged on investment-grade corporate bonds but narrowed for speculative-grade bonds.Conditions in short-term funding markets remained stable over the intermeeting period. Spreads on commercial paper and negotiable certificates of deposit across different tenors were little changed and remained near historically low levels. Assets under management (AUM) of government money market funds (MMFs) rose over the intermeeting period, whereas AUM of prime MMFs declined somewhat.The effective federal funds rate and the Secured Overnight Financing Rate averaged 7 basis points and 3 basis points, respectively, over the intermeeting period, decreasing somewhat relative to the previous intermeeting period average amid a net decrease in Treasury bill issuance and rising reserves. There continued to be no participation in the Federal Reserve's repo operations, but participation in the Federal Reserve's ON RRP increased a little. Amid stable market conditions, there was no take-up in the Money Market Mutual Fund Liquidity Facility or the Commercial Paper Funding Facility.Improved U.S. economic growth prospects and optimism about the eventual lifting of social-distancing and related restrictions globally were major drivers of asset prices abroad, spurring sizable increases in sovereign yields in advanced foreign economies. In response to rising yields, the Reserve Bank of Australia increased its bond purchases, and the European Central Bank indicated it would increase the pace of its bond purchases going forward. The broad dollar index rose modestly, with more notable appreciation against currencies of emerging market economies (EMEs). EME sovereign spreads edged up, and flows into EME bond funds fell back later in the period amid the rise in yields in advanced economies. However, flows into dedicated EME equity funds remained strong. Overall, foreign equity indexes increased slightly in most major markets.Financing conditions for nonfinancial businesses in capital markets remained broadly accommodative over the intermeeting period, supported by low interest rates and high equity valuations. Gross and net corporate bond issuances were solid in January and February. Gross issuance of leveraged loans was strong in January, driven mainly by refinancing activity, as primary-market spreads compressed notably since the end of last year in response to strong investor demand for such loans. Equity raised through traditional initial public offerings and seasoned equity offerings continued to be strong in January and February, and initial equity offerings by special purpose acquisition companies remained exceptionally high. Commercial and industrial loans outstanding on banks' balance sheets continued to decline through February as loan paydowns persisted and demand for new bank credit reportedly remained subdued.Corporate earnings continued to recover while the credit quality of nonfinancial corporations improved further. Corporate bond defaults declined in December and January and reached levels substantially below their 2019 average. In addition, the volume of nonfinancial corporate credit rating upgrades modestly outpaced downgrades over the first two months of 2021. Market indicators of future default expectations moved lower.Financing conditions for small businesses remained tight. Demand for loans remained depressed—and loan originations fell in December last year to about the same level seen in August—after the spike in lending associated with the first round of the Paycheck Protection Program. Long-term delinquencies remained elevated relative to recent years but were at levels significantly below those experienced during the Global Financial Crisis. Municipal market financing conditions stayed accommodative over the intermeeting period.For commercial real estate (CRE) financed through capital markets, financing conditions remained accommodative over the intermeeting period. Agency CMBS spreads narrowed further with strong issuance in December and January. Spreads on non-agency CMBS also tightened, although triple-B spreads stayed at elevated levels compared with pre-pandemic levels. Issuance of non-agency CMBS remained weak relative to pre-pandemic levels. CRE loan growth at banks was weak, on net, through February, consistent with tight bank lending standards.Financing conditions in the residential mortgage market tightened somewhat over the intermeeting period but remained accommodative for stronger borrowers. Mortgage rates for most borrowers increased but stayed near historically low levels, supporting elevated refinance and purchase activity through January. Credit was broadly available to higher-score borrowers meeting standard conforming loan criteria but tightened further for borrowers with lower credit scores. The share of mortgages in forbearance was unchanged.Financing conditions in consumer credit markets remained generally accommodative for borrowers with strong credit scores but were still tight for those with nonprime scores. Auto loan balances continued to grow in January, while credit card balances declined. Interest rates on new credit card offers to borrowers with prime credit scores continued to trend down, on net, through December. In contrast, offer rates to nonprime borrowers rose further. Conditions in the asset-backed securities market were stable during the intermeeting period.Staff Economic Outlook The U.S. economic projection prepared by the staff for the March FOMC meeting was considerably stronger than the January forecast. Real GDP growth appeared to be picking up at the beginning of this year by more than the staff had expected, likely reflecting both a faster-than-anticipated easing in social distancing and a more rapid response by households to the fiscal support package enacted in late December. Moreover, the size of the ARP enacted in March was considerably larger than what the staff had assumed in the January projection. All told, real GDP growth was projected to be substantial this year and the unemployment rate was forecast to decline markedly, as the staff's projection also continued to anticipate that widespread vaccination would allow for further easing in social distancing this year. Real GDP growth was expected to step down in 2022 and 2023 but still outpace that of potential over this period, leading to a decline in the unemployment rate to historically low levels, as monetary policy was assumed to remain highly accommodative.Incoming data on inflation were a little above what the staff had expected. The 12‑month changes in total and core PCE prices were expected to transitorily move above 2 percent in coming months, as the low inflation readings from the spring of last year dropped out of the calculation window. In addition, inflation was forecast to be temporarily boosted this year by the expected emergence of some production bottlenecks and supply constraints. Following the transitory increase this year, inflation was projected to run a bit below 2 percent next year and then to reach 2 percent by 2023, reflecting tight resource utilization in product and labor markets.The staff continued to see the uncertainty surrounding the outlook as elevated. Moreover, the uncertain course of the pandemic, particularly the emergence of more-contagious strains of the coronavirus in the United States and elsewhere, was still viewed as tilting the risks to the economic outlook to the downside. However, given the resilience of the economy in the face of the earlier surge in new COVID-19 cases, hospitalizations, and deaths and the magnitude of fiscal support enacted, the downside risks to the economic outlook were seen as smaller than for the previous projection. The staff viewed the risks of upside inflationary pressures as having increased since the previous forecast and now saw the risks to the inflation projection as balanced.Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2021 through 2023 and over the longer run, based on their individual assessments of appropriate monetary policy, including the path of the federal funds rate. The longer-run projections represented each participant's assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. A Summary of Economic Projections was released to the public following the conclusion of the meeting.In their discussion of current conditions, participants noted that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment had turned up recently, although the sectors most adversely affected by the pandemic remained weak. Inflation continued to run below 2 percent. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Participants noted that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations, and that the ongoing public health crisis would continue to weigh on economic activity, employment, and inflation and posed considerable risks to the economic outlook.Participants observed that the pace of the economic recovery had picked up recently and that the economy continued to show resilience in the face of the pandemic. They noted encouraging developments regarding the pandemic, including significant declines in the number of new cases, hospitalizations, and deaths over the intermeeting period as well as a pickup in the pace of vaccinations. In light of these developments as well as the extent of the recent fiscal policy support, participants significantly revised up their projections for real GDP growth this year compared with the projections they submitted last December. They noted, however, that economic activity and employment were currently well below levels consistent with maximum employment.Participants observed that the economic downturn had not fallen equally on all Americans and that lower-income and Black and Hispanic households had been disproportionately affected by the pandemic. A number of participants stressed that recently enacted fiscal support would help address some of the hardships faced by these groups and that monetary policy would also help by promoting the economy's return to the Committee's goals of broad-based and inclusive maximum employment and price stability.Participants observed that household spending had risen notably so far this year and anticipated that further gains in consumer spending would contribute significantly to the economic recovery. While household spending on services that typically require close personal contact remained weak, participants expected spending on these services would improve as vaccinations became more widespread, social-distancing measures were relaxed, and the public became less wary of close personal interactions. Participants anticipated consumer spending would be bolstered by the recently enacted fiscal stimulus packages as well as by accommodative monetary policy. Many participants also pointed to the elevated level of household savings and judged that the release of pent-up demand could boost consumption growth further as social distancing waned. Participants also observed that residential construction continued to be solid and home sales remained robust in part because of low interest rates. Low inventory was viewed as an important factor supporting strong gains in housing prices.With respect to the business sector, participants observed that business equipment investment had continued to increase and that readings on new orders and shipments of capital goods remained strong. While some District contacts continued to report that firms in industries such as CRE or leisure, travel, and hospitality were struggling from pandemic-related social distancing, other District contacts reported that activity in these industries had started to improve. Participants noted that surveys of business activity had picked up recently and that many District contacts were growing increasingly optimistic about business prospects given ongoing progress on vaccinations. Participants also discussed reports of shortages in materials, key intermediate inputs, and labor as well as bottlenecks in shipping. A few participants noted that higher crop prices were continuing to boost income in the agricultural sector. Several participants judged that the support provided by the ARP could improve the financial positions of small firms that had been adversely affected by the pandemic.Participants observed that labor market conditions had improved recently, as payroll employment registered strong gains in February and the unemployment rate fell to 6.2 percent. Even so, payroll employment was about 9.5 million jobs below its pre-pandemic level, and labor market conditions for those in the most disadvantaged communities were viewed as lagging behind those of other households. Moreover, participants noted that employment in the leisure and hospitality sector was still down substantially from its pre-pandemic level despite a sharp rebound in February. Participants generally expected strong job gains to continue over coming months and into the medium term, supported by accommodative fiscal and monetary policies as well as by continued progress on vaccinations, further reopening of sectors most affected by the pandemic, and the associated recovery in economic activity. However, participants noted that the economy was far from achieving the Committee's broad-based and inclusive goal of maximum employment. Some participants commented that labor force participation continued to be held down by workers' health concerns and additional childcare responsibilities associated with virtual schooling and that the pace of recovery in the labor market would depend importantly on how rapidly those affected by these issues could rejoin the labor force. Several participants noted that the speed of the labor market recovery also depended on factors such as the movement of workers across industries and occupations in a restructuring economy or the effects of technological change on the demand for labor. Several participants suggested that the ARP could hasten the recovery, which could help limit longer-term damage in labor markets caused by the pandemic.Participants observed that headline PCE inflation continued to run below 2 percent. In the near term, the 12-month change in PCE prices was expected to move above 2 percent as the low inflation readings from the spring of last year drop out of the calculation. Most participants also pointed to supply constraints that could contribute to price increases for some goods in coming months as the economy continued to reopen. After the transitory effects of these factors fade, however, participants generally anticipated that annual inflation readings would edge down next year. Subsequently, participants expected that inflation would likely move along a trajectory consistent with achieving the Committee's objectives over time, supported by strong aggregate demand, which participants expected would be driven in part by accommodative monetary and fiscal policies.Participants discussed market- and survey-based measures of longer-term inflation expectations and their implications for the inflation outlook. Market-based measures of inflation compensation at the 5- and 10-year horizons had continued to move up over the intermeeting period, while survey-based measures of inflation expectations were little changed on balance. A number of participants indicated that the increases in market-based measures of inflation compensation from the very low levels of last spring were consistent with the view that inflation was likely to move along a path over time consistent with the Committee's goals.Participants noted that overall financial conditions remained highly accommodative, in part reflecting the stance of monetary policy. Participants commented on the notable rise in longer-term Treasury yields that occurred over the intermeeting period and generally viewed it as reflecting the improved economic outlook, some firming in inflation expectations, and expectations for increased Treasury debt issuance. Disorderly conditions in Treasury markets or a persistent rise in yields that could jeopardize progress toward the Committee's goals were seen as cause for concern. While overall financial conditions were still seen as accommodative, a number of participants remarked that financing conditions remained challenging for many small businesses. A couple of participants expressed concern that highly accommodative financial conditions could lead to excessive risk-taking and the buildup of financial imbalances.While generally acknowledging that the medium-term outlook for real GDP growth and employment had improved, participants continued to see the uncertainty surrounding that outlook as elevated. Participants agreed that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. Most participants indicated that the pandemic continued to pose considerable risks to the economic outlook, including risks associated with new more-contagious virus strains, obstacles in getting sufficient numbers of the public vaccinated, or social-distancing fatigue. A few participants pointed to risks associated with stress in the CRE sector or to risks associated with the unwinding of mortgage forbearance and eviction moratoriums provided to households. With regard to upside risks, some participants pointed to the possibility that fiscal policy could have a more expansionary effect than anticipated, that households could display a greater-than-expected willingness to spend out of accumulated savings, or that widespread vaccinations and easing of social distancing could result in a more rapid boost to spending and employment than anticipated.Most participants noted that they viewed the risks to the outlook for inflation as broadly balanced. Several remarked that supply disruptions and strong demand could push up price inflation more than anticipated. Several participants commented that the factors that had contributed to low inflation during the previous expansion could again exert more downward pressure on inflation than expected.In their consideration of the stance of monetary policy, participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time, thereby promoting the Committee's statutory goals of maximum employment and price stability. Participants noted that indicators of economic activity and employment had turned up recently after a period of moderation, although the sectors most adversely affected by the pandemic remained weak. Despite these positive indicators and an improved public health situation, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook. Consequently, participants judged that the current stance of policy and policy guidance remained appropriate to foster further economic recovery as well as to achieve inflation that averages 2 percent over time and longer-term inflation expectations that remain well anchored at 2 percent.Participants judged that the Committee's current guidance for the federal funds rate and asset purchases was serving the economy well. They noted that a benefit of the outcome-based guidance was that it did not need to be recalibrated often in response to incoming data or the evolving outlook. Participants also noted the importance of communicating to the public that the existing guidance, together with the new monetary policy framework as delineated in the revised Statement on Longer-Run Goals and Monetary Policy Strategy, meant that the path of the federal funds rate and the balance sheet depend on actual progress toward reaching the Committee's maximum-employment and inflation goals. In particular, various participants noted that changes in the path of policy should be based primarily on observed outcomes rather than forecasts.Participants agreed that overall financial conditions were accommodative. They noted that the Federal Reserve's asset purchases since last March had materially eased financial conditions and were providing substantial support to the economy. Participants noted that it would likely be some time until substantial further progress toward the Committee's maximum-employment and price-stability goals would be realized and that, consistent with the Committee's outcome-based guidance, asset purchases would continue at least at the current pace until then. A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the COVID-19 pandemic was causing tremendous human and economic hardship across the United States and around the world. They noted that following a moderation in the pace of the recovery, indicators of economic activity and employment had turned up recently, although the sectors most adversely affected by the pandemic remained weak. Inflation continued to run below 2 percent. Overall financial conditions remained accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Members also remarked that the path of the economy would depend significantly on the course of the virus, including progress on vaccinations. In addition, members agreed that the ongoing public health crisis continued to weigh on economic activity, employment, and inflation and was posing considerable risks to the economic outlook.Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals. All members reaffirmed that, in accordance with the Committee's goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run and with inflation running persistently below this longer-run goal, they would aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. Members expected to maintain an accommodative stance of monetary policy until those outcomes were achieved.All members agreed to maintain the target range for the federal funds rate at 0 to 1/4 percent, and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time. In addition, members agreed that it would be appropriate for the Federal Reserve to continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made toward the Committee's maximum-employment and price-stability goals. They judged that these asset purchases would help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook and that they would be prepared to adjust the stance of monetary policy as appropriate in the event that risks emerged that could impede the attainment of the Committee's goals. Members also agreed that, in assessing the appropriate stance of monetary policy, they would take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.With regard to the postmeeting statement, in light of the notably positive tone of recent data, members judged that it was appropriate to incorporate that development in the description of the economic situation with the language that "indicators of economic activity and employment have turned up recently." Members also determined that, with oil prices having essentially retraced their pandemic-related declines, it was appropriate to remove the reference to oil prices as a factor holding down consumer price inflation and to simply state that "inflation continues to run below 2 percent." Regarding the directive to the Desk, members agreed that the directive should incorporate the proposed increase in the per-counterparty limit for the ON RRP facility to $80 billion.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective March 18, 2021, the Federal Open Market Committee directs the Desk to:The vote also encompassed approval of the statement below for release at 2:00 p.m.:"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak. Inflation continues to run below 2 percent. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Thomas I. Barkin, Raphael W. Bostic, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Mary C. Daly, Charles L. Evans, Randal K. Quarles, and Christopher J. Waller.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective March 18, 2021.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, April 27–28, 2021. The meeting adjourned at 10:20 a.m. on March 17, 2021.Notation Vote By notation vote completed on February 16, 2021, the Committee unanimously approved the minutes of the Committee meeting held on January 26–27, 2021. _______________________ James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended through the discussion of developments in financial markets and open market operations. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2021 03 17Consumer Resources January 28-29, 2020A joint meeting of the Federal Open Market Committee and the Board of Governors was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, January 28, 2020, at 10:00 a.m. and continued on Wednesday, January 29, 2020, at 9:00 a.m.1PRESENT: Jerome H. Powell, Chairman John C. Williams, Vice Chairman Michelle W. Bowman Lael Brainard Richard H. Clarida Patrick Harker Robert S. Kaplan Neel Kashkari Loretta J. Mester Randal K. QuarlesThomas I. Barkin, Raphael W. Bostic, Mary C. Daly, Charles L. Evans, and Michael Strine,2 Alternate Members of the Federal Open Market CommitteeJames Bullard, Esther L. George, and Eric Rosengren, Presidents of the Federal Reserve Banks of St. Louis, Kansas City, and Boston, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Thomas Laubach, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, Marc Giannoni, Joseph W. Gruber, David E. Lebow, Trevor A. Reeve, Ellis W. Tallman, William Wascher, and Mark L.J. Wright, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsEric Belsky,3 Director, Division of Consumer and Community Affairs, Board of Governors; Matthew J. Eichner,4 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Michael S. Gibson, Director, Division of Supervision and Regulation, Board of Governors; Steven B. Kamin, Director, Division of International Finance, Board of Governors; Andreas Lehnert, Director, Division of Financial Stability, Board of GovernorsRochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board of Governors; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Office of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Office of Board Members, Board of GovernorsAntulio N. Bomfim, Brian M. Doyle, Wendy E. Dunn, Ellen E. Meade, and Ivan Vidangos, Special Advisers to the Board, Office of Board Members, Board of GovernorsLinda Robertson and David W. Skidmore, Assistants to the Board, Office of Board Members, Board of GovernorsDavid Bowman,5 Senior Associate Director, Division of Monetary Affairs, Board of Governors; Eric M. Engen and Michael G. Palumbo, Senior Associate Directors, Division of Research and Statistics, Board of Governors; John W. Schindler, Senior Associate Director, Division of Financial Stability, Board of GovernorsDon H. Kim and Edward Nelson, Senior Advisers, Division of Monetary Affairs, Board of GovernorsEric C. Engstrom, Senior Adviser, Division of Research and Statistics, and Deputy Associate Director, Division of Monetary Affairs, Board of GovernorsElizabeth Klee,3 Associate Director, Division of Financial Stability, Board of GovernorsChristopher J. Gust,5 Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Norman J. Morin and Steven A. Sharpe, Deputy Associate Directors, Division of Research and Statistics, Board of Governors; Jeffrey D. Walker,4 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors; Paul R. Wood,3 Deputy Associate Director, Division of International Finance, Board of GovernorsRicardo Correa and Stephanie E. Curcuru,6 Assistant Directors, Division of International Finance, Board of Governors; Giovanni Favara and Zeynep Senyuz,5 Assistant Directors, Division of Monetary Affairs, Board of GovernorsPenelope A. Beattie,3 Section Chief, Office of the Secretary, Board of Governors; Dana L. Burnett, Section Chief, Division of Monetary Affairs, Board of GovernorsHess T. Chung,3 Group Manager, Division of Research and Statistics, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Jonathan E. Goldberg, Judit Temesvary, and Francisco Vazquez-Grande, Principal Economists, Division of Monetary Affairs, Board of Governors; Daniel J. Vine, Principal Economist, Division of Research and Statistics, Board of GovernorsFrancesco Ferrante, Senior Economist, Division of International Finance, Board of Governors; Michael Siemer,3 Senior Economist, Division of Research and Statistics, Board of Governors; Manjola Tase, Senior Economist, Division of Monetary Affairs, Board of GovernorsJames Hebden,3 Senior Technology Analyst, Division of Monetary Affairs, Board of GovernorsMark A. Gould, First Vice President, Federal Reserve Bank of San FranciscoDavid Altig,3 Kartik B. Athreya, Jeffrey Fuhrer, Anna Paulson, and Christopher J. Waller, Executive Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, Boston, Chicago, and St. Louis, respectivelyJulie Ann Remache,5 Samuel Schulhofer-Wohl,5 and Keith Sill, Senior Vice Presidents, Federal Reserve Banks of New York, Chicago, and Philadelphia, respectivelyJonathan P. McCarthy, Ed Nosal, Matthew D. Raskin,5 and Patricia Zobel, Vice Presidents, Federal Reserve Banks of New York, Atlanta, New York, and New York, respectivelyLarry Wall,3 Executive Director, Federal Reserve Bank of AtlantaÒscar Jordà, Senior Policy Advisor, Federal Reserve Bank of San FranciscoEdward S. Prescott,3 Senior Economist and Policy Advisor, Federal Reserve Bank of ClevelandBrent Bundick, Research and Policy Advisor, Federal Reserve Bank of Kansas CityAnnual Organizational Matters7 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 28, 2020, were received and that these individuals executed their oaths of office.The elected members and alternate members were as follows:John C. Williams, President of the Federal Reserve Bank of New York, with Michael Strine, First Vice President of the Federal Reserve Bank of New York, as alternatePatrick Harker, President of the Federal Reserve Bank of Philadelphia, with Thomas I. Barkin, President of the Federal Reserve Bank of Richmond, as alternateLoretta J. Mester, President of the Federal Reserve Bank of Cleveland, with Charles L. Evans, President of the Federal Reserve Bank of Chicago, as alternateRobert S. Kaplan, President of the Federal Reserve Bank of Dallas, with Raphael W. Bostic, President of the Federal Reserve Bank of Atlanta, as alternateNeel Kashkari, President of the Federal Reserve Bank of Minneapolis, with Mary C. Daly, President of the Federal Reserve Bank of San Francisco, as alternateBy unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2021:By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA).By unanimous vote, the Committee selected Lorie K. Logan to serve at the pleasure of the Committee as manager of the SOMA, on the understanding that her selection was subject to being satisfactory to the Federal Reserve Bank of New York.Secretary's note: The Federal Reserve Bank of New York subsequently sent advice that the manager selection indicated previously was satisfactory.By unanimous vote, the Committee voted to reaffirm without revision the Authorization for Domestic Open Market Operations as shown below. The Guidelines for the Conduct of System Open Market Operations in Federal-Agency Issues remained suspended.AUTHORIZATION FOR DOMESTIC OPEN MARKET OPERATIONS (As reaffirmed effective January 28, 2020)OPEN MARKET TRANSACTIONS1. The Federal Open Market Committee (the "Committee") authorizes and directs the Federal Reserve Bank selected by the Committee to execute open market transactions (the "Selected Bank"), to the extent necessary to carry out the most recent domestic policy directive adopted by the Committee:A. To buy or sell in the open market securities that are direct obligations of, or fully guaranteed as to principal and interest by, the United States, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, that are eligible for purchase or sale under Section 14(b) of the Federal Reserve Act ("Eligible Securities") for the System Open Market Account ("SOMA"):i. As an outright operation with securities dealers and foreign and international accounts maintained at the Selected Bank: on a same-day or deferred delivery basis (including such transactions as are commonly referred to as dollar rolls and coupon swaps) at market prices; orii. As a temporary operation: on a same-day or deferred delivery basis, to purchase such Eligible Securities subject to an agreement to resell ("repo transactions") or to sell such Eligible Securities subject to an agreement to repurchase ("reverse repo transactions") for a term of 65 business days or less, at rates that, unless otherwise authorized by the Committee, are determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual counterparties;B. To allow Eligible Securities in the SOMA to mature without replacement;C. To exchange, at market prices, in connection with a Treasury auction, maturing Eligible Securities in the SOMA with the Treasury, in the case of Eligible Securities that are direct obligations of the United States or that are fully guaranteed as to principal and interest by the United States; andD. To exchange, at market prices, maturing Eligible Securities in the SOMA with an agency of the United States, in the case of Eligible Securities that are direct obligations of that agency or that are fully guaranteed as to principal and interest by that agency.SECURITIES LENDING2. In order to ensure the effective conduct of open market operations, the Committee authorizes the Selected Bank to operate a program to lend Eligible Securities held in the SOMA to dealers on an overnight basis (except that the Selected Bank may lend Eligible Securities for longer than an overnight term to accommodate weekend, holiday, and similar trading conventions).A. Such securities lending must be:i. At rates determined by competitive bidding;ii. At a minimum lending fee consistent with the objectives of the program;iii. Subject to reasonable limitations on the total amount of a specific issue of Eligible Securities that may be auctioned; andiv. Subject to reasonable limitations on the amount of Eligible Securities that each borrower may borrow.B. The Selected Bank may:i. Reject bids that, as determined in its sole discretion, could facilitate a bidder's ability to control a single issue;ii. Accept Treasury securities or cash as collateral for any loan of securities authorized in this paragraph 2; andiii. Accept agency securities as collateral only for a loan of agency securities authorized in this paragraph 2.OPERATIONAL READINESS TESTING3. The Committee authorizes the Selected Bank to undertake transactions of the type described in paragraphs 1 and 2 from time to time for the purpose of testing operational readiness, subject to the following limitations:A. All transactions authorized in this paragraph 3 shall be conducted with prior notice to the Committee;B. The aggregate par value of the transactions authorized in this paragraph 3 that are of the type described in paragraph 1.A.i, 1.B, 1.C and 1.D shall not exceed $5 billion per calendar year; andC. The outstanding amount of the transactions described in paragraphs 1.A.ii and 2 shall not exceed $5 billion at any given time.TRANSACTIONS WITH CUSTOMER ACCOUNTS4. In order to ensure the effective conduct of open market operations, while assisting in the provision of short-term investments or other authorized services for foreign central bank and international accounts maintained at a Federal Reserve Bank (the "Foreign Accounts") and accounts maintained at a Federal Reserve Bank as fiscal agent of the United States pursuant to section 15 of the Federal Reserve Act (together with the Foreign Accounts, the "Customer Accounts"), the Committee authorizes the following when undertaken on terms comparable to those available in the open market:A. The Selected Bank, for the SOMA, to undertake reverse repo transactions in Eligible Securities held in the SOMA with the Customer Accounts for a term of 65 business days or less; andB. Any Federal Reserve Bank that maintains Customer Accounts, for any such Customer Account, when appropriate and subject to all other necessary authorization and approvals, to:i. Undertake repo transactions in Eligible Securities with dealers with a corresponding reverse repo transaction in such Eligible Securities with the Customer Accounts; andii. Undertake intra-day repo transactions in Eligible Securities with Foreign Accounts.Transactions undertaken with Customer Accounts under the provisions of this paragraph 4 may provide for a service fee when appropriate. Transactions undertaken with Customer Accounts are also subject to the authorization or approval of other entities, including the Board of Governors of the Federal Reserve System and, when involving accounts maintained at a Federal Reserve Bank as fiscal agent of the United States, the United States Department of the Treasury.ADDITIONAL MATTERS5. The Committee authorizes the Chairman of the Committee, in fostering the Committee's objectives during any period between meetings of the Committee, to instruct the Selected Bank to act on behalf of the Committee to:A. Adjust somewhat in exceptional circumstances the stance of monetary policy and to take actions that may result in material changes in the composition and size of the assets in the SOMA; orB. Undertake transactions with respect to Eligible Securities in order to appropriately address temporary disruptions of an operational or highly unusual nature in U.S. dollar funding markets.Any such adjustment described in subparagraph A of this paragraph 5 shall be made in the context of the Committee's discussion and decision about the stance of policy at its most recent meeting and the Committee's long-run objectives to foster maximum employment and price stability, and shall be based on economic, financial, and monetary developments since the most recent meeting of the Committee. The Chairman, whenever feasible, will consult with the Committee before making any instruction under this paragraph 5.The Committee voted unanimously to reaffirm without revision the Authorization for Foreign Currency Operations and the Foreign Currency Directive as shown below.AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS (As reaffirmed effective January 28, 2020)IN GENERAL1. The Federal Open Market Committee (the "Committee") authorizes the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions for the System Open Market Account as provided in this Authorization, to the extent necessary to carry out any foreign currency directive of the Committee:A. To purchase and sell foreign currencies (also known as cable transfers) at home and abroad in the open market, including with the United States Treasury, with foreign monetary authorities, with the Bank for International Settlements, and with other entities in the open market. This authorization to purchase and sell foreign currencies encompasses purchases and sales through standalone spot or forward transactions and through foreign exchange swap transactions. For purposes of this Authorization, foreign exchange swap transactions are: swap transactions with the United States Treasury (also known as warehousing transactions), swap transactions with other central banks under reciprocal currency arrangements, swap transactions with other central banks under standing dollar liquidity and foreign currency liquidity swap arrangements, and swap transactions with other entities in the open market.B. To hold balances of, and to have outstanding forward contracts to receive or to deliver, foreign currencies.2. All transactions in foreign currencies undertaken pursuant to paragraph 1 above shall, unless otherwise authorized by the Committee, be conducted:A. In a manner consistent with the obligations regarding exchange arrangements under Article IV of the Articles of Agreement of the International Monetary Fund (IMF).1B. In close and continuous cooperation and consultation, as appropriate, with the United States Treasury.C. In consultation, as appropriate, with foreign monetary authorities, foreign central banks, and international monetary institutions.D. At prevailing market rates.STANDALONE SPOT AND FORWARD TRANSACTIONS3. For any operation that involves standalone spot or forward transactions in foreign currencies:A. Approval of such operation is required as follows:i. The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the "Subcommittee") must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available.ii. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee.B. Such an operation also shall be:i. Generally directed at countering disorderly market conditions; orii. Undertaken to adjust System balances in light of probable future needs for currencies; oriii. Conducted for such other purposes as may be determined by the Committee.C. For purposes of this Authorization, the overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.WAREHOUSING4. The Committee authorizes the Selected Bank, with the prior approval of the Subcommittee and at the request of the United States Treasury, to conduct swap transactions with the United States Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934 under agreements in which the Selected Bank purchases foreign currencies from the Exchange Stabilization Fund and the Exchange Stabilization Fund repurchases the foreign currencies from the Selected Bank at a later date (such purchases and sales also known as warehousing).RECIPROCAL CURRENCY ARRANGEMENTS, AND STANDING DOLLAR AND FOREIGN CURRENCY LIQUIDITY SWAPS5. The Committee authorizes the Selected Bank to maintain reciprocal currency arrangements established under the North American Framework Agreement, standing dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements as provided in this Authorization and to the extent necessary to carry out any foreign currency directive of the Committee.A. For reciprocal currency arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).B. For standing dollar liquidity swap arrangements all drawings must be approved in advance by the Chairman. The Chairman may approve a schedule of potential drawings, and may delegate to the manager, System Open Market Account, the authority to approve individual drawings that occur according to the schedule approved by the Chairman.C. For standing foreign currency liquidity swap arrangements all drawings must be approved in advance by the Committee (or by the Subcommittee, if the Subcommittee believes that consultation with the Committee is not feasible in the time available).D. Operations involving standing dollar liquidity swap arrangements and standing foreign currency liquidity swap arrangements shall generally be directed at countering strains in financial markets in the United States or abroad, or reducing the risk that they could emerge, so as to mitigate their effects on economic and financial conditions in the United States.E. For reciprocal currency arrangements, standing dollar liquidity swap arrangements, and standing foreign currency liquidity swap arrangements:i. All arrangements are subject to annual review and approval by the Committee;ii. Any new arrangements must be approved by the Committee; andiii. Any changes in the terms of existing arrangements must be approved in advance by the Chairman. The Chairman shall keep the Committee informed of any changes in terms, and the terms shall be consistent with principles discussed with and guidance provided by the Committee.OTHER OPERATIONS IN FOREIGN CURRENCIES6. Any other operations in foreign currencies for which governance is not otherwise specified in this Authorization (such as foreign exchange swap transactions with private‑sector counterparties) must be authorized and directed in advance by the Committee.FOREIGN CURRENCY HOLDINGS7. The Committee authorizes the Selected Bank to hold foreign currencies for the System Open Market Account in accounts maintained at foreign central banks, the Bank for International Settlements, and such other foreign institutions as approved by the Board of Governors under Section 214.5 of Regulation N, to the extent necessary to carry out any foreign currency directive of the Committee.A. The Selected Bank shall manage all holdings of foreign currencies for the System Open Market Account:i. Primarily, to ensure sufficient liquidity to enable the Selected Bank to conduct foreign currency operations as directed by the Committee;ii. Secondarily, to maintain a high degree of safety;iii. Subject to paragraphs 7.A.i and 7.A.ii, to provide the highest rate of return possible in each currency; andiv. To achieve such other objectives as may be authorized by the Committee.B. The Selected Bank may manage such foreign currency holdings by:i. Purchasing and selling obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof ("Permitted Foreign Securities") through outright purchases and sales;ii. Purchasing Permitted Foreign Securities under agreements for repurchase of such Permitted Foreign Securities and selling such securities under agreements for the resale of such securities; andiii. Managing balances in various time and other deposit accounts at foreign institutions approved by the Board of Governors under Regulation N.C. The Subcommittee, in consultation with the Committee, may provide additional instructions to the Selected Bank regarding holdings of foreign currencies.ADDITIONAL MATTERS8. The Committee authorizes the Chairman:A. With the prior approval of the Committee, to enter into any needed agreement or understanding with the Secretary of the United States Treasury about the division of responsibility for foreign currency operations between the System and the United States Treasury;B. To advise the Secretary of the United States Treasury concerning System foreign currency operations, and to consult with the Secretary on policy matters relating to foreign currency operations;C. To designate Federal Reserve System persons authorized to communicate with the United States Treasury concerning System Open Market Account foreign currency operations; andD. From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary and Financial Policies.9. The Committee authorizes the Selected Bank to undertake transactions of the type described in this Authorization, and foreign exchange and investment transactions that it may be otherwise authorized to undertake, from time to time for the purpose of testing operational readiness. The aggregate amount of such transactions shall not exceed $2.5 billion per calendar year. These transactions shall be conducted with prior notice to the Committee.10. All Federal Reserve banks shall participate in the foreign currency operations for System Open Market Account in accordance with paragraph 3G(1) of the Board of Governors' Statement of Procedure with Respect to Foreign Relationships of Federal Reserve Banks dated January 1, 1944.11. Any authority of the Subcommittee pursuant to this Authorization may be exercised by the Chairman if the Chairman believes that consultation with the Subcommittee is not feasible in the time available. The Chairman shall promptly report to the Subcommittee any action approved by the Chairman pursuant to this paragraph.12. The Committee authorizes the Chairman, in exceptional circumstances where it would not be feasible to convene the Committee, to foster the Committee's objectives by instructing the Selected Bank to engage in foreign currency operations not otherwise authorized pursuant to this Authorization. Any such action shall be made in the context of the Committee's discussion and decisions regarding foreign currency operations. The Chairman, whenever feasible, will consult with the Committee before making any instruction under this paragraph.FOREIGN CURRENCY DIRECTIVE (As reaffirmed effective January 28, 2020)1. The Committee directs the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions, for the System Open Market Account, in accordance with the provisions of the Authorization for Foreign Currency Operations (the "Authorization") and subject to the limits in this Directive.2. The Committee directs the Selected Bank to execute warehousing transactions, if so requested by the United States Treasury and if approved by the Foreign Currency Subcommittee (the "Subcommittee"), subject to the limitation that the outstanding balance of United States dollars provided to the United States Treasury as a result of these transactions not at any time exceed $5 billion.3. The Committee directs the Selected Bank to maintain, for the System Open Market Account:A. Reciprocal currency arrangements with the following foreign central banks:B. Standing dollar liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National BankC. Standing foreign currency liquidity swap arrangements with the following foreign central banks:Bank of Canada Bank of England Bank of Japan European Central Bank Swiss National Bank4. The Committee directs the Selected Bank to hold and to invest foreign currencies in the portfolio in accordance with the provisions of paragraph 7 of the Authorization.5. The Committee directs the Selected Bank to report to the Committee, at each regular meeting of the Committee, on transactions undertaken pursuant to paragraphs 1 and 6 of the Authorization. The Selected Bank is also directed to provide quarterly reports to the Committee regarding the management of the foreign currency holdings pursuant to paragraph 7 of the Authorization.6. The Committee directs the Selected Bank to conduct testing of transactions for the purpose of operational readiness in accordance with the provisions of paragraph 9 of the Authorization.By unanimous vote, the Committee amended its Program for Security of FOMC Information (Program) with three sets of changes, effective February 1, 2020. These changes consisted of (1) an update to the rules for eligibility for access to FOMC information to reflect two new policies approved by the Board; (2) the addition of references to existing Federal Reserve polices that help safeguard FOMC information; and (3) organizational and technical changes to improve the consistency and accuracy of Program language.By unanimous vote, the Committee provided approval for the publication of a Federal Register notice of proposed rulemaking that seeks public comment on minor and technical updates to the FOMC Rules Regarding Availability of Information, which are the Committee's Freedom of Information Act rules.Review of Monetary Policy Strategy, Tools, and Communication Practices Participants continued their discussion related to the ongoing review of the Federal Reserve's monetary policy strategy, tools, and communication practices. At this meeting, the discussion focused on two topics: the potential interactions between monetary policy and financial stability and the potential use of inflation ranges around the Committee's 2 percent inflation objective. The staff briefing on the first topic noted that in the current environment of low neutral rates, achieving the Committee's dual-mandate goals of maximum employment and price stability would require low policy rates frequently, regardless of the monetary policy strategy and tools chosen. Consequently, policy strategies and tools that help support a stronger economy and anchor inflation expectations at a level consistent with the Committee's objective in a low-neutral-rate environment can help promote financial stability. In addition, the staff reported that the available empirical evidence suggests that the effects of changes in policy rates on asset prices and risk premiums tend to be modest relative to the historical fluctuations in those measures. However, there may be circumstances in which a persistently accommodative policy stance that is otherwise consistent with the dual-mandate goals may contribute to an increase in financial system vulnerabilities, including through increased borrowing, financial leverage, and valuation pressures. The staff noted that clear communications of the Committee's ongoing assessments of the interactions between monetary policy and financial stability could help avoid large interest rate surprises that could otherwise contribute to financial vulnerabilities. The briefing concluded with a short review of how other central banks have approached this issue, including the use of financial instability escape clauses to provide leeway for the central bank to deviate from its usual monetary policy strategy if financial vulnerabilities become significant.In their discussion of the effects that alternative monetary policy strategies and tools might have on financial stability, participants noted that macroeconomic stability and the achievement of the Committee's dual mandate depended on a stable financial system. An unstable financial system may amplify shocks to the economy and exacerbate increases in unemployment or drive inflation further away from the Committee's goal. With respect to the relationship between monetary policy and financial stability, some participants noted that evidence regarding the link between the policy stance and elevated financial vulnerabilities was limited, with a couple of participants further observing that there were not many episodes of persistently low interest rates. In addition, some past episodes of heightened financial vulnerabilities were associated with excessive risk-taking behavior that did not seem to be very responsive to typical changes in interest rates. A number of participants judged that, under some circumstances, low policy rates might help foster financial stability provided they are needed to support strong economic conditions and price stability. Some participants remarked, however, that keeping policy rates low to achieve both of the Committee's dual-mandate objectives may contribute to a buildup of financial vulnerabilities, especially at times when the economy is at or above full employment, a development that could pose future risks to the economy and to the ability of the Committee to achieve its dual mandate.Participants discussed how financial stability considerations should be incorporated in the conduct of monetary policy. They generally agreed that supervisory, regulatory, and macroprudential tools should be the primary means to address financial stability risks. A few participants commented that this is especially the case when addressing risks associated with structural features such as the current low level of neutral interest rates. A number of participants noted that countercyclical macroprudential tools, such as the countercyclical capital buffer, could be used to address cyclical financial stability risks. However, various participants noted that while these tools could be deployed proactively to lean against the buildup of financial vulnerabilities, they have some limitations in the context of the U.S. financial system, where the few available tools are, for the most part, not designed to address vulnerabilities outside the banking sector. In addition, these tools are not within the authority of the Committee, and their use requires coordination with other prudential regulators. Recognizing these limitations, many participants remarked that the Committee should not rule out the possibility of adjusting the stance of monetary policy to mitigate financial stability risks, particularly when those risks have important implications for the economic outlook and when macroprudential tools had been or were likely to be ineffective at mitigating those risks. Nevertheless, many participants noted that the current knowledge of the interactions between the stance of monetary policy and financial vulnerabilities is too imprecise to warrant systematically adjusting monetary policy in response to the evolution of financial stability risks. As a result, monetary policy should be guided primarily by the outlook for employment and inflation, and it should respond to financial stability risks only insofar as such risks significantly threaten the achievement of the Committee's mandate. Several participants observed that the monetary policy measures needed to curb financial stability risks could be quite large, and the resulting effects on employment and inflation could place a high hurdle for such measures. Some participants remarked that, because financial stability risks are a consideration for achieving the Committee's dual mandate, a clear communications strategy would be needed to convey the Committee's assessments of financial vulnerabilities and their potential implications for the monetary policy outlook. Several participants noted that a communications strategy could include the possible use of financial instability escape clauses to help explain the rationale for policy actions when a buildup of financial vulnerabilities poses risks to the achievement of the Committee's goals.The staff's briefing on considerations regarding the use of an inflation range focused on three different concepts of an inflation range. First, an uncertainty range could communicate the magnitude of the inherent variability of inflation that would still be consistent with achieving the Committee's symmetric inflation objective. Second, an operational range could signal that, under some conditions, the Committee would prefer inflation to be away from its longer-run objective for a time; such a range could potentially be used as part of a makeup policy strategy, including one based on average inflation targeting, or in other strategies aimed at offsetting the adverse effects of a binding effective lower bound on policy rates. Third, an indifference range could communicate that monetary policy would not respond to deviations of inflation within that range. The briefing also summarized the experiences of foreign central banks that use inflation ranges; these ranges were typically put in place many years ago, often in conjunction with adopting an inflation target. The staff highlighted the communications challenges that could arise if an inflation range were introduced at a time when inflation had been running below the central bank's objective for a number of years. In this environment, the introduction of a symmetric range around the point objective could be misinterpreted as a sign that the central bank was not concerned about inflation remaining below its stated goal, a situation that could lead to inflation expectations drifting down to the lower end of the range.Participants expressed a range of views on the potential benefits and costs of different types of inflation ranges. Most participants expressed concern that introducing a symmetric inflation range around the 2 percent objective following an extended period of inflation mostly running somewhat below 2 percent could be misperceived as a signal that the Committee was comfortable with continued misses below its symmetric inflation objective. Many participants agreed that an uncertainty range could be misinterpreted as an indifference range and hence as a lack of commitment by the Committee to its symmetric 2 percent inflation objective. Some participants suggested that it was not clear that introducing a range would help much in achieving the Committee's inflation objective; they noted that introducing a range could make that objective less clear to the public. Instead of establishing a range, the Committee could continue to communicate that its inflation objective was symmetric around 2 percent. While inflation is inherently variable, the Committee then could emphasize its intention for inflation to be centered on the 2 percent objective. Nevertheless, in view of the inherent variability of inflation, several participants judged that there could be some benefit in communicating the inflation objective with a symmetric range around the point target. In addition, a few participants suggested that an inflation range could convey the uncertainty associated with the available array of inflation measures or that the Committee's communications could more explicitly reference other measures of inflation. Several participants also stated that employing an asymmetric operational range for a time—with 2 percent being at or near the lower end of that range—while still maintaining the longer-run target of 2 percent could help communicate that the Committee intended inflation to average 2 percent over time, which in turn could help keep longer-run inflation expectations at levels consistent with its objective.Participants expected that, at upcoming meetings, they would continue their deliberations on the Committee's review of monetary policy strategy, tools, and communication practices. Participants continued to anticipate that the review will likely be completed around the middle of this year.Developments in Financial Markets and Open Market Operations The SOMA manager reviewed developments in financial markets over the intermeeting period. For most of the period, risk asset prices rose as market participants focused on a perceived reduction in downside risks to the economic outlook, favorable data on foreign economic activity, and expectations of continued monetary policy accommodation in the United States and other major economies. Some market participants suggested that the Federal Reserve's actions in the fourth quarter to maintain ample reserve levels might have contributed to some degree to the rise in equity and other risk asset prices. Over the final few days of the intermeeting period, financial markets responded to news of the spread of the coronavirus that started in China, which reportedly contributed to downward moves in Treasury yields and, to a lesser extent, U.S. equity prices. On balance, U.S. financial conditions became more accommodative over the intermeeting period, with equity prices rising notably.Despite signs of reduced risks to the outlook and of some stabilization in economic activity abroad, financial market participants' views on the likely course of U.S. monetary policy appeared to have changed little over the intermeeting period. Market-based indicators continued to point to expectations that the target range for the federal funds rate will be lowered by roughly 30 basis points this year. This was consistent with responses to the Open Market Desk's survey, which continued to indicate that, while market participants viewed no change this year in the target range as the most likely outcome, they placed a higher probability on a reduction in the target range over the year than on an increase. Market commentary attributed the stability in federal funds rate expectations despite the perceived reduction in downside risks partly to the Committee's communications; some market participants reportedly regarded those communications as signaling a relatively high bar for changes to the target range. In addition, results from the Desk's surveys suggested that, notwithstanding the abatement in some risks over recent months, many market participants continued to see risks to the economic outlook as skewed to the downside.The manager turned next to a review of money market developments and Desk operations. The federal funds rate was stable over the year-end date and remained close to the interest on excess reserves (IOER) rate. Ongoing reserve management purchases of Treasury bills and the Desk's repurchase agreement (repo) operations kept aggregate reserves above the level that prevailed in early September, contributing to relatively calm money market conditions around year-end. Market participants cited funding from the additional longer-term repo operations spanning year-end and increased capacity in daily operations as helping to maintain stable conditions in short-term funding markets. In addition, market participants prepared earlier than usual for year-end, with borrowers increasing their term borrowing from private lenders and lenders apparently expanding their lending capacity.Since year-end, money market rates remained stable, with the Desk's longer-term repos maturing with no discernible effect on market conditions and reserve management purchases of Treasury bills proceeding smoothly. At the current pace of $60 billion per month, the staff's estimates suggested that after April of this year, the Desk's reserve management purchases will restore the permanent base of reserves to levels above those prevailing in early September 2019. Although reserves are projected to be above $1.5 trillion before April, a surge in the Treasury General Account balance during the April tax season is expected to briefly reduce reserve levels and, in the absence of repo operations, bring reserves down temporarily to around $1.5 trillion.The manager discussed a potential plan for gradually transitioning to an operational approach designed to maintain ample reserve levels without the active use of repo operations to supply reserves. Under this plan, repo operations would be maintained at least through April to ensure ample reserve conditions. However, the Desk would continue the gradual reduction and consolidation of its repo offerings ahead of April, with the plan of phasing out term repo operations after April. As part of this transition, the minimum bid rate on repo operations could be gradually lifted, and the Committee could consider whether there is a role for repo operations in the implementation framework.In the second quarter, the manager expected reserve conditions to support slowing the pace of Treasury bill purchases, with the goal of eventually aligning growth of the Federal Reserve's Treasury holdings with trend growth in its liabilities. As that time approaches, the Committee might wish to consider the appropriate maturity composition of reserve management purchases of Treasury securities. The manager noted that, although the pace of Treasury purchases would likely continue into the second quarter, the rate of expansion in the Federal Reserve's balance sheet would moderate during the first half of 2020 as repo outstanding was gradually reduced.The manager's briefing addressed the possibility of a small technical adjustment to the Federal Reserve's administered rates in light of the stability in money market conditions over recent months. With this adjustment, the Board would lift the interest rates on required and excess reserves by 5 basis points, and the FOMC would implement an equal-sized upward adjustment to the overnight reverse repurchase agreement offer rate. This technical adjustment would reverse the small downward adjustment to administered rates made in September, when money markets were volatile.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. No intervention operations occurred in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The information available for the January 28–29 meeting indicated that labor market conditions remained strong and that real gross domestic product (GDP) increased at a moderate rate in the fourth quarter of 2019. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in November. Survey-based measures of longer-run inflation expectations were little changed.Total nonfarm payroll employment rose in December, and the solid pace of job gains over the second half of 2019 was somewhat above that for the first half. However, the rate of increase in payrolls in 2019 was slower than in 2018, whether or not one accounted for the anticipated effects of the Bureau of Labor Statistics' benchmark revision to payroll employment, which was scheduled for early February. The unemployment rate held steady at its 50‑year low of 3.5 percent in December, and the labor force participation rate and the employment-to-population ratio were unchanged as well. The unemployment rates for African Americans, Asians, Hispanics, and whites were below their levels at the end of the previous economic expansion. Although persistent differentials between these rates remained, they have generally narrowed during the expansion. The average share of workers employed part time for economic reasons in November stayed below its level in late 2007. The rate of private-sector job openings declined, on net, in October and November but was still at a fairly high level; the rate of quits, which was also at a high level, edged up. The four-week moving average of initial claims for unemployment insurance benefits through mid-January remained near historically low levels. Nominal wage growth was moderate, with average hourly earnings for all employees increasing 2.9 percent over the 12 months ending in December.Total consumer prices, as measured by the PCE price index, increased 1.5 percent over the 12 months ending in November. Core PCE price inflation (which excludes changes in consumer food and energy prices) was 1.6 percent over that same 12-month period. Consumer food price inflation was lower than core inflation, and consumer energy prices declined. The trimmed mean measure of 12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas remained at 2 percent in November. The consumer price index (CPI) and the core CPI both rose 2.3 percent over the 12 months ending in December. Recent readings on survey-based measures of longer-run inflation expectations were little changed, on balance, in recent months. The University of Michigan Surveys of Consumers' measure for the next 5 to 10 years moved back up in early January after having fallen to its lowest value on record in December. Meanwhile, the 3-year-ahead measure from the Federal Reserve Bank of New York's Survey of Consumer Expectations remained near its historical low in December.Real PCE appeared to have risen more slowly in the fourth quarter than in the third quarter. Retail sales were soft during the fourth quarter, and sales of light motor vehicles declined in December after a strong gain in November. However, key factors that influence consumer spending—including the low unemployment rate, the upward trend in real disposable income, high levels of households' net worth, and generally low interest rates—remained supportive of solid real PCE growth in the near term. In addition, recent readings on consumer confidence from both the University of Michigan and the Conference Board surveys were strong.Real residential investment appeared to have increased solidly again in the fourth quarter. Starts for single-family homes increased sharply over the November and December period, building permit issuance for such homes rose on net, and starts of multifamily units also moved up. Existing home sales increased, on balance, in November and December, while new home sales declined. All told, the data on residential construction and sales continued to suggest that the decline in mortgage rates since late 2018 had been boosting housing activity.The available data pointed to another decline in real nonresidential private fixed investment in the fourth quarter, with a further contraction in structures investment more than offsetting a modest rise in investment in equipment and intangibles. Nominal shipments and new orders of nondefense capital goods excluding aircraft were little changed in the fourth quarter. Although some measures of business sentiment improved, analysts' expectations of firms' longer-term profit growth edged down further, concerns about trade developments continued to weigh on firms' investment decisions, and reduced deliveries of the Boeing 737 Max were likely restraining investment. Nominal business expenditures for nonresidential structures outside of the drilling and mining sector continued to decline in November. The total number of crude oil and natural gas rigs in operation—an indicator of business spending for structures in the drilling and mining sector—was little changed, on net, through mid-January, though still below levels seen over the latter part of 2019.Industrial production (IP) increased, on net, in November and December, partly because of a pickup in motor vehicle production following the strike at General Motors. Even so, IP was lower than a year earlier, with declines in manufacturing production and the output of utilities only partly offset by an increase in mining output. Automakers' schedules suggested that assemblies of light motor vehicles would increase in the first quarter, but that gain appeared likely to be offset by Boeing's curtailed production of the 737 Max aircraft and, more generally, by mixed readings on new orders from national and regional manufacturing surveys.Total real government purchases appeared to have increased moderately in the fourth quarter. Nominal defense spending in November and December pointed to only a moderate rise in real federal government purchases. Real purchases by state and local governments looked to have risen a little faster than in the third quarter; nominal construction spending by these governments increased solidly in November, and state and local payrolls expanded modestly in December.Real net exports were estimated to have provided a substantial boost to real GDP growth in the fourth quarter. Available monthly data suggested that imports fell significantly, led by declines in consumer goods and automobiles, while exports were about flat.Incoming data suggested that foreign economic growth slowed further in the fourth quarter to a very subdued pace. In the advanced foreign economies (AFEs), growth appeared to have remained weak as the manufacturing slump continued and a consumption tax hike in Japan led to a sharp contraction in household spending. In the emerging economies, social unrest weighed heavily on economic activity in Hong Kong and Chile, while the labor strike at General Motors was a further drag on Mexico's already weak economy. In contrast, early GDP releases showed a pickup in growth in China and some other Asian economies, though news of the coronavirus outbreak raised questions about the sustainability of that pickup. Foreign inflation rose in the wake of temporary factors in India and China, while it remained soft in most AFEs, in part reflecting previous declines in energy prices and muted core inflation pressures.Staff Review of the Financial Situation Investor sentiment improved, on balance, over the intermeeting period, mostly reflecting progress related to the phase-one trade deal between the United States and China and its subsequent signing, the perception that the probability of a disorderly Brexit had declined, signs of stabilization in the global economic outlook, and, reportedly, continued confidence that monetary policy in the United States and other major economies would remain accommodative in the near term. Late in the period, concerns about the spread of the coronavirus and uncertainty about its potential economic effect weighed negatively on investor sentiment and led to moderate declines in the prices of risky assets. On net, equity prices increased notably over the intermeeting period, while corporate bond spreads were little changed and yields on nominal Treasury securities declined. Financing conditions for businesses and households eased a bit further and generally remained supportive of spending and economic activity.Federal Reserve communications over the intermeeting period reportedly reinforced investors' beliefs that a near-term change to the target range for the federal funds rate was unlikely. Consistent with those reports, a straight read of the probability distributions for the federal funds rate implied by options prices suggested that investors assigned a high probability to the target range remaining unchanged over the next few months. Expectations for the federal funds rate at the end of 2020, as implied by overnight index swap quotes, moved down slightly, on net, and implied about a 30 basis point decline in the federal funds rate from its current level.Yields on nominal Treasury securities declined, on net, across the maturity spectrum over the intermeeting period, while the spread between the yields on nominal 10‑ and 2-year Treasury securities was little changed. Measures of inflation compensation over the next 5 years and 5 to 10 years ahead based on Treasury Inflation-Protected Securities decreased, on net, but remained above their October 2019 lows.Broad stock price indexes increased notably, on balance, over the intermeeting period, with gains largely attributed to improved market sentiment about trade negotiations and a perceived lower probability of a disorderly Brexit. Late in the period, equity prices retraced some of their gains, as concerns about the spread of the coronavirus weighed negatively on risk sentiment. Overall movements in stock prices varied widely across economic sectors, with stocks of firms in the information technology and utilities sectors significantly outperforming aggregate indexes, while stock prices of firms in the energy sector declined markedly. Option-implied volatility on the S&P 500 index increased a bit, on balance, while corporate credit spreads were little changed.Conditions in domestic short-term funding markets, including in secured financing, were stable over the intermeeting period, even over year-end. Rates declined slightly, likely reflecting increased liquidity and a higher level of reserves provided by the Desk's open market operations. The effective federal funds rate remained close to the IOER rate, and spreads for term unsecured commercial paper and negotiable certificates of deposit narrowed substantially, particularly after year-end. The Desk's open market operations proceeded smoothly.For most of the intermeeting period, foreign equity prices rose amid progress on U.S.–China trade negotiations, generally favorable data on global economic activity, and the reduced risk of a disorderly Brexit following the U.K. general election. Late in the period, however, concerns about the coronavirus outbreak in China weighed on risk sentiment. On balance, most major foreign equity indexes increased modestly, and AFE long-term sovereign yields ended the period somewhat lower. U.K. and Canadian yields declined more than elsewhere against the backdrop of central bank communications that were interpreted as increasing the likelihood of policy easing in those countries.The broad dollar index weakened slightly over the period, predominantly against emerging market currencies. The Chinese renminbi appreciated notably against the dollar on positive trade policy developments, but this gain was more than undone late in the period by concerns about the coronavirus. The Mexican peso strengthened against the dollar, supported by progress on the U.S.-Mexico-Canada Agreement (USMCA) and Bank of Mexico communications that were perceived as less accommodative than expected.Financing conditions for nonfinancial firms remained accommodative, on balance, with corporate borrowing costs staying near historical lows during the intermeeting period. Gross issuance of investment-grade corporate bonds was subdued in January and December after surging in November. Issuance of speculative-grade bonds over the intermeeting period remained about in line with the average pace over December and January in recent years. Institutional leveraged loan issuance continued to be robust in December, reflecting solid refinancing activity and moderate new money issuance. Meanwhile, commercial and industrial (C&I) loans on banks' balance sheets contracted in the fourth quarter. Respondents to the January 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) reported that borrower demand weakened for C&I loans over the fourth quarter, and lending standards on such loans were little changed. Gross equity issuance through seasoned offerings remained robust in December, while initial public offerings continued to be quite light. The credit quality of nonfinancial corporations and the earnings outlook remained generally stable in recent months. Credit conditions for both small businesses and municipalities remained accommodative on net.In the commercial real estate (CRE) sector, financing conditions also remained generally accommodative. The volume of agency and non-agency commercial mortgage-backed securities issuance grew notably in the fourth quarter, buoyed by lower interest rates, and the growth of CRE loans on banks' books picked up over this period. Responses to the January 2020 SLOOS suggested that lending standards and demand for most CRE loan categories were unchanged in the fourth quarter.Financing conditions in the residential mortgage market remained accommodative on balance. Mortgage rates decreased notably during the intermeeting period, reaching recent-year lows. Home-purchase originations remained around post-crisis highs, and mortgage refinancing activity continued at a strong pace through December.Financing conditions in consumer credit markets remained supportive of growth in consumer spending, although the supply of credit remained relatively tight for nonprime borrowers. The growth of credit card balances slowed in the fourth quarter, and, according to the January SLOOS, commercial banks tightened their standards on credit card loans over this period. Auto loan growth maintained a solid pace in recent months amid declining interest rates through year-end.The staff provided an update on its assessments of potential risks to financial stability. On balance, the financial vulnerabilities of the U.S. financial system were characterized as moderate. The staff judged that asset valuation pressures had increased in recent months to an elevated level. Asset valuation pressures were characterized as fairly widespread across a number of markets, similar to the situation in much of 2017 and 2018. In assessing vulnerabilities stemming from borrowing in the household and business sectors, the staff noted that, while the ratio of household debt to nominal GDP was fairly low, the ratio of business debt to nominal GDP was high by historical standards. At the same time, major financial institutions were viewed as resilient, in part because of high levels of capital at banks. Nonetheless, the staff noted that banks had announced that they intend to allow their capital ratios to decline closer to regulatory requirements over the medium term. Vulnerabilities stemming from funding risk were characterized as moderate. While the money market strains in September raised some questions about vulnerabilities in funding markets, the staff assessed that the core of the financial system remains resilient to vulnerabilities from maturity and liquidity transformation.Staff Economic Outlook The projection for U.S. real GDP growth prepared by the staff for the January FOMC meeting was stronger than in the previous forecast. Data pertaining to the fourth quarter of 2019, particularly on imports, suggested output rose faster at the end of the year than was previously projected, and this faster pace seemed consistent with the solid employment gains in the fourth quarter. In addition, more supportive financial conditions and the anticipated effects of the phase-one trade deal between the United States and China pushed up the staff's GDP forecast for this year and next. All told, real GDP growth was projected to be about the same in 2020 as in 2019 and then to slow modestly in the coming years, partly because of a fading boost from fiscal policy. Output was forecast to expand at a rate a little above the staff's estimate of its potential rate of growth in 2020 and 2021 and then to slow to a pace slightly below potential output growth in 2022. The unemployment rate was projected to decline a little further this year and to remain at that lower level through 2022; the unemployment rate was anticipated to be below the staff's estimate of its longer-run natural rate throughout the forecast period.The staff's forecasts for both total and core PCE price inflation over the 2020–22 period were essentially unrevised. Core inflation was still projected to step up a little in 2020 but to run a bit below 2 percent both this year and over the next two years. Total PCE price inflation was projected to be a little lower than core inflation in 2020 because of a projected decline in consumer energy prices and to be the same as core inflation in 2021 and 2022.The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as generally similar to the average of the past 20 years. The staff viewed the downside risks to economic activity as having diminished a bit further since the previous forecast but still judged that the risks to the forecast for real GDP growth were tilted to the downside, with a corresponding skew to the upside for the unemployment rate. Important factors influencing this assessment were that foreign economic and geopolitical developments still seemed more likely to move in directions that could have significant negative effects on the U.S. economy than to resolve more favorably than assumed. In addition, softness in business investment and manufacturing production last year, as well as the recent weakness in imports, was seen as pointing to the possibility of a more substantial slowing in economic growth than the staff projected. The risks to the inflation projection were also viewed as having a downward skew, in part because of the downside risks to the forecast for economic activity.Participants' Views on Current Conditions and the Economic Outlook Participants agreed that the labor market had remained strong over the intermeeting period and that economic activity had risen at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had risen at a moderate pace, business fixed investment and exports had remained weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy were running below 2 percent. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations were little changed.Participants generally judged that the current stance of monetary policy was appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. They expected economic growth to continue at a moderate pace, supported by accommodative monetary and financial conditions. In addition, some trade uncertainties had diminished recently, and there were some signs of stabilization in global growth. Nonetheless, uncertainties about the outlook remained, including those posed by the outbreak of the coronavirus.In their discussion of the household sector, participants noted that spending growth had moderated in the fourth quarter. However, they generally expected that, in the period ahead, consumption spending would likely remain on a firm footing, supported by strong labor market conditions, rising incomes, and healthy household balance sheets. Some participants noted the upbeat tone of consumer surveys, and a few commented that their District contacts had reported solid retail sales during the holiday shopping season. In addition, many participants were encouraged by the significant pickup since last summer in residential investment, a development that reflected, in part, the effects of lower mortgage rates.With respect to the business sector, participants observed that business investment and exports remained weak and that manufacturing output had declined over the past year. Looking ahead, participants were generally cautiously optimistic about the effects on the business sector of the recent favorable trade developments and the signs of stabilization in global growth. Many participants expressed the view that these developments might boost business confidence or raise export demand, which would help strengthen or at least stabilize business investment. A few participants remarked that contacts in their Districts had noted that business sentiment was brighter or that companies were intending to expand their capital expenditures this year. Several other participants, however, judged that the effect of the recent trade agreement with China would be relatively limited, as trade uncertainty would likely remain elevated, with the possibility remaining of the emergence of new tensions as well as the reescalation of existing tensions. They noted that the agreement would still leave a large portion of tariffs in place and that many firms had already been making production and supply chain adjustments in response to trade tensions.Participants also commented on ongoing challenges facing the energy and agriculture sectors. A couple of participants remarked that activity in the energy sector continued to be weak, and a few noted that financial conditions in the agricultural sector would likely remain challenging for many despite farm subsidies from the federal government and recent optimism surrounding trade prospects.Participants judged that conditions in the labor market remained strong, with the unemployment rate at a 50‑year low and continued solid job gains, on average. Although the upcoming annual benchmark revision was expected to reduce estimates of recent payroll growth, participants expected payroll employment to expand at a healthy pace this year. Business contacts in many Districts indicated continued strong labor demand, with several participants mentioning that contacts reported difficulties in finding qualified workers or that observed wage growth might currently understate the degree of tightness in the labor market. However, a number of participants indicated that aggregate measures of nominal wages continued to rise at a moderate pace broadly in line with productivity growth and the rate of inflation. Several participants commented on potential reasons for the absence of stronger broad-based wage pressures, including technological changes that could substitute for labor, increased willingness of employees to forgo wage gains for greater job stability, adjustments in nonwage portions of compensation packages, and the possibility that the labor market was not as tight as the historically low unemployment rate would suggest. Many participants pointed to the strong performance of labor force participation despite the downward pressures associated with an aging population, and several raised the possibility that there was some room for labor force participation to rise further.In their discussion of inflation developments, participants noted that recent readings on overall and core PCE price inflation, measured on a 12-month basis, had continued to run below 2 percent. Overall, participants described their inflation outlook as having changed little since December. Participants generally expected inflation to move closer to 2 percent in the coming months as the unusually low readings in early 2019 drop out of the 12-month calculation. Participants also expected that, as the economic expansion continues and resource utilization remains high, inflation would return to the 2 percent objective on a sustainable basis. A few participants expressed less confidence in this outlook for inflation and commented that inflation had averaged less than 2 percent over the past several years even as resource utilization had increased, or pointed to downward pressures from global or technology-related factors that could continue to suppress inflation. A couple of participants, however, noted that some alternative inflation indicators, including trimmed mean measures, suggested that there had been a modest step-up in underlying inflation during 2019 or that underlying inflation could already be at a level consistent with the Committee's goal.Participants generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting, although a number of downside risks remained prominent. The easing of trade tensions resulting from the recent agreement with China and the passage of the USMCA as well as tentative signs of stabilization in global economic growth helped reduce downside risks and appeared to buoy business sentiment. The risk of a "hard" Brexit had appeared to recede further. In addition, statistical models designed to estimate the probability of recession using financial market data suggested that the likelihood of a recession occurring over the next year had fallen notably in recent months. Still, participants generally expected trade-related uncertainty to remain somewhat elevated, and they were mindful of the possibility that the tentative signs of stabilization in global growth could fade. Geopolitical risks, especially in connection with the Middle East, remained. The threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching.In their discussion of financial stability, participants acknowledged the staff report suggesting that overall financial vulnerabilities remained moderate and that the financial system remained resilient. Nonetheless, several participants observed that equity, corporate debt, and CRE valuations were elevated and drew attention to high levels of corporate indebtedness and weak underwriting standards in leveraged loan markets. Some participants expressed the concern that financial imbalances—including overvaluation and excessive indebtedness—could amplify an adverse shock to the economy, that the current conditions of low interest rates and labor market tightness could increase risks to financial stability, or that cyber attacks could affect the U.S. financial system. Several participants noted that planned increases in dividend payouts by large banks and the associated decline in capital buffers might leave those banks with less capacity to weather adverse shocks—which could have negative implications for the economy—or that lower bank capital ratios could be associated with greater tail risks to GDP growth. On the other hand, capital levels at U.S. banks were quite high relative to other sectors of the financial system, raising questions about the potential migration of lending activities away from the U.S. banking sector to areas outside the oversight of federal banking supervisors.In their consideration of monetary policy at this meeting, participants judged that it would be appropriate to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. With regard to monetary policy beyond this meeting, participants viewed the current stance of policy as likely to remain appropriate for a time, provided that incoming information about the economy remained broadly consistent with this economic outlook. Of course, if developments emerged that led to a material reassessment of the outlook, an adjustment to the stance of monetary policy would be appropriate, in order to foster achievement of the Committee's dual-mandate objectives.In commenting on the monetary policy outlook, participants concurred that maintaining the current stance of policy would give the Committee time for a fuller assessment of the ongoing effects on economic activity of last year's shift to a more accommodative policy stance and would also allow policymakers to accumulate further information bearing on the economic outlook. Participants discussed how maintaining the current policy stance for a time could be helpful in supporting U.S. economic activity and employment in the face of global developments that have been weighing on spending decisions.With regard to the Committee's price-stability objective, participants observed that the current degree of monetary policy accommodation would be useful in facilitating a return of inflation to 2 percent. Several participants noted that inflation returning to 2 percent would help ensure that longer-term inflation expectations remained consistent with the Committee's longer-run inflation objective. A few participants stressed that the Committee should be more explicit about the need to achieve its inflation goal on a sustained basis. Several participants suggested that inflation modestly exceeding 2 percent for a period would be consistent with the achievement of the Committee's longer-run inflation objective and that such mild overshooting might underscore the symmetry of that objective. With regard to the Committee's maximum employment objective, a few participants observed that the actual level of employment might still be below maximum employment and that maintaining the present monetary policy stance would allow the economy to achieve that maximum level. A couple of other participants expressed concern that tight labor markets have in the past been associated with economic and financial imbalances and that the emergence of such imbalances might jeopardize the longer-run attainment of the Committee's dual-mandate goals.Participants discussed the open market operations that the Federal Reserve had undertaken since September to implement monetary policy, as well as forthcoming operational measures. Participants agreed that the operations undertaken by the Desk since mid-September had been effective in helping to stabilize conditions in money markets and that implementation of the plan that the Committee announced in October to purchase Treasury bills and conduct repo operations had proceeded smoothly. Participants observed that enactment of this plan had succeeded in replenishing reserve balances to levels at or above those prevailing in early September 2019 and in ensuring continued control of the federal funds rate. Many participants stressed that, as reserves approached durably ample levels, the need for sizable Treasury bill purchases and repo operations would diminish and that such operations could be gradually scaled back or phased out. Beyond that point, regular open market operations would be required over time in order to accommodate the trend growth in the Federal Reserve's liabilities and maintain an ample level of reserves. Participants who commented on the Desk's proposal for the transition to the ample-reserves regime indicated that they were comfortable with that proposal. They remarked that the details of the Committee's plans would be adjusted as appropriate to support effective implementation of monetary policy. Participants noted that it would be important to continue to communicate to the public that open market operations now and in the period ahead were technical operations aimed at achieving and maintaining ample reserves and that any adjustments to those operations were not intended to represent a change in the stance of monetary policy. Several participants suggested that the Committee should resume before long its discussion of the role that repo operations might play in an ample-reserves regime, including the possible creation of a standing repo facility. A couple of these participants cited the potential for such a facility to reduce the banking system's demand for reserves over the longer term.Committee Policy Action In their discussion of monetary policy for this meeting, members noted that information received since the FOMC met in December indicated that the labor market remained strong and that economic activity had been rising at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had been rising at a moderate pace, business fixed investment and exports remained weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy were running below 2 percent. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations were little changed.Members agreed to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. Members judged that the current stance of monetary policy was appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.Members also agreed that, in determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee would assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. And they concurred that this assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.With regard to the postmeeting statement, members agreed that incoming data warranted a change in the statement's description of recent rises in household spending from "strong" to "moderate." They also agreed to describe the current monetary policy stance as consistent with inflation "returning to," rather than being "near," their symmetric 2 percent longer-run objective. In commenting on this change in wording, a few members noted that the new language would make the postmeeting statement more consistent with the Committee's outlook or might usefully affirm the symmetry of the Committee's inflation goal and indicate that policymakers were not satisfied with inflation outcomes that were persistently below 2 percent.At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:"Effective January 30, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1-1/2 to 1-3/4 percent. In light of recent and expected increases in the Federal Reserve's non-reserve liabilities, the Committee directs the Desk to continue purchasing Treasury bills at least into the second quarter of 2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations at least through April 2020 to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation. In addition, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.50 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.The Committee directs the Desk to continue rolling over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and to continue reinvesting all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month. Principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20 billion per month will continue to be reinvested in agency mortgage-backed securities. Small deviations from these amounts for operational reasons are acceptable.The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions."The vote also encompassed approval of the statement below for release at 2:00 p.m.:"Information received since the Federal Open Market Committee met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."Voting for this action: Jerome H. Powell, John C. Williams, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Patrick Harker, Robert S. Kaplan, Neel Kashkari, Loretta J. Mester, and Randal K. Quarles.Voting against this action: None.Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to raise the interest rates on required and excess reserve balances to 1.60 percent. Setting the interest rate paid on required and excess reserve balances 10 basis points above the bottom of the target range for the federal funds rate is intended to foster trading in the federal funds market at rates well within the FOMC's target range. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 2.25 percent, effective January 30, 2020.It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, March 17-18, 2020. The meeting adjourned at 9:50 a.m. on January 29, 2020.Notation Vote By notation vote completed on January 2, 2020, the Committee unanimously approved the minutes of the Committee meeting held on December 10-11, 2019._______________________James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to text2. Attended Tuesday's session only. Return to text3. Attended through the discussion of the review of the monetary policy framework. Return to text4. Attended through the discussion of developments in financial markets and open market operations. Return to text5. Attended the discussion of developments in financial markets and open market operations. Return to text6. Attended the discussion of economic developments and the outlook. Return to text7. Committee organizational documents are available at https://www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. Return to text1. In general, as specified in Article IV, each member of the IMF undertakes to collaborate with the IMF and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. These obligations include seeking to direct the member's economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability. These obligations also include avoiding manipulating exchange rates or the international monetary system in such a way that would impede effective balance of payments adjustment or to give an unfair competitive advantage over other members. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2020 01 29Consumer Resources March 15, 2020A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Sunday, March 15, 2020, at 10:00 a.m.1PRESENT: Jerome H. Powell, Chair John C. Williams, Vice Chair Michelle W. Bowman Lael Brainard Richard H. Clarida Patrick Harker Robert S. Kaplan Neel Kashkari Loretta J. Mester Randal K. QuarlesThomas I. Barkin, Raphael W. Bostic, Mary C. Daly, and Charles L. Evans, Alternate Members of the Federal Open Market CommitteeJames Bullard, Esther L. George, and Eric Rosengren, Presidents of the Federal Reserve Banks of St. Louis, Kansas City, and Boston, respectivelyJames A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Michael Held, Deputy General Counsel Thomas Laubach, Economist Stacey Tevlin, Economist Beth Anne Wilson, EconomistShaghil Ahmed, Michael Dotsey, Joseph W. Gruber, Beverly Hirtle, David E. Lebow, Trevor A. Reeve, and Ellis W. Tallman, Associate EconomistsLorie K. Logan, Manager, System Open Market AccountAnn E. Misback, Secretary, Office of the Secretary, Board of GovernorsMatthew J. Eichner, 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; Rochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board of Governors; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board of GovernorsJon Faust, Senior Special Adviser to the Chair, Office of Board Members, Board of GovernorsJoshua Gallin, Special Adviser to the Chair, Office of Board Members, Board of GovernorsAntulio N. Bomfim, Brian M. Doyle, Wendy E. Dunn, and Ellen E. Meade, Special Advisers to the Board, Office of Board Members, Board of GovernorsLinda Robertson, Assistant to the Board, Office of Board Members, Board of GovernorsEdward Nelson, Senior Adviser, Division of Monetary Affairs, Board of GovernorsAndrew Figura and John M. Roberts, Deputy Associate Directors, Division of Research and Statistics, Board of GovernorsRebecca Zarutskie, Assistant Director, Division of Monetary Affairs, Board of GovernorsBrett Berger, Adviser, Division of International Finance, Board of GovernorsRandall A. Williams, Senior Information Manager, Division of Monetary Affairs, Board of GovernorsJose Acosta, Senior Communications Analyst, Division of Information Technology, Board of GovernorsEllen J. Bromagen and Ron Feldman, First Vice Presidents, Federal Reserve Banks of Chicago and Minneapolis, respectivelyKartik B. Athreya, Anna Paulson, Daleep Singh, and Christopher J. Waller, Executive Vice Presidents, Federal Reserve Banks of Richmond, Chicago, New York, and St. Louis, respectivelyPaula Tkac, Robert G. Valletta, and Nathaniel Wuerffel, Senior Vice Presidents, Federal Reserve Banks of Atlanta, San Francisco, and New York, respectivelyGeorge A. Kahn, Matthew D. Raskin, and Patricia Zobel, Vice Presidents, Federal Reserve Banks of Kansas City, New York, and New York, respectivelyKarel Mertens, Senior Economic Policy Advisor, Federal Reserve Bank of DallasDevelopments in Financial Markets and Open Market Operations The System Open Market Account (SOMA) manager first reviewed developments in domestic and global financial markets. Financial markets remained exceptionally volatile amid the global spread of the coronavirus and uncertainty regarding its effects. Since the meeting of the FOMC in late January, the S&P 500 index declined 18 percent, nominal U.S. Treasury yields moved 60 to 100 basis points lower, and market-based measures of inflation compensation fell 75 to 100 basis points. Investment-grade and high-yield credit spreads widened about 120 basis points and 360 basis points, respectively. The U.S. dollar appreciated notably against most currencies, with the exception of other safe-haven currencies, and crude oil prices dropped 40 percent. Against this backdrop, expectations for the path of the federal funds rate adjusted sharply. Implied rates on federal funds futures contracts suggested the Committee was expected to reduce the target range 1 full percentage point at its upcoming scheduled meeting following the 50 basis point reduction in the target range in early March. In addition, market participants reportedly anticipated that the Committee would announce additional purchases of Treasury securities and agency mortgage-backed securities (MBS).Trading conditions across a range of markets were severely strained. In corporate bond markets, trading activity and liquidity were at very low levels, although not back to the low point reached in 2008. Market participants expected that actions taken to slow the spread of the virus could have significant effects on the credit worthiness of certain borrowers, particularly those at the lower end of the credit spectrum. Market participants also increasingly pointed to concerns in other segments of the debt market. In securitized markets, including those for asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS), primary market issuance slowed, and secondary market trading had become less orderly, with money managers selling short-dated liquid products to meet investor redemptions.In the Treasury market, following several consecutive days of deteriorating conditions, market participants reported an acute decline in market liquidity. A number of primary dealers found it especially difficult to make markets in off-the-run Treasury securities and reported that this segment of the market had ceased to function effectively. This disruption in intermediation was attributed, in part, to sales of off-the-run Treasury securities and flight-to-quality flows into the most liquid, on-the-run Treasury securities.Conditions in short-term funding markets also deteriorated sharply amid a decline in market liquidity and challenges in dealer intermediation. Over recent days, the premium paid to obtain dollars through the foreign exchange swap market increased sharply, and the volumes in term repurchase agreement (repo) markets dropped significantly. Issuance of commercial paper (CP) maturing beyond one week reportedly almost dried up at the end of the week before the meeting, and primary- and secondary-market liquidity for financial and nonfinancial CP was described as nearly nonexistent at a time when investor concern about issuer credit risk was rising.The manager then summarized actions taken by the Desk to address some of the strains in financial markets. Repo lending operations were greatly expanded to address the acute worsening in term funding markets; these operations included the addition of large-scale one- and three-month term repo operations. Despite the sizable offering of additional term repo, take-up was well below the offered amounts, and there was little improvement in Treasury market functioning. As a result, the Chair, in consultation with the FOMC, instructed the Desk to conduct purchases of Treasury securities across a range of maturities. The Desk also revised the schedule of Treasury purchases, announcing that $37 billion of the monthly scheduled purchases would be completed on Friday, March 13. These purchases were conducted across the curve. Market participants suggested that the operations had been helpful in addressing some funding pressures, but trading conditions in Treasury, mortgage, and credit markets remained severely strained. The SOMA manager noted that, if the FOMC directed the Desk to conduct additional purchases of MBS and Treasury securities, the Desk could initially conduct such purchases at a more rapid pace to more quickly address liquidity strains.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 coronavirus outbreak was disrupting economic activity in many countries, including the United States, by the time of the March 15 meeting. There were limited available U.S. economic data, however, that covered the period since the intensification of concerns about the domestic effects of the outbreak. Information that predated that period indicated that labor market conditions had remained strong through February and that real gross domestic product (GDP) appeared to have been increasing at a moderate pace in the first two months of the year. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in January. Survey-based measures of longer-run inflation expectations were little changed.Total nonfarm payroll employment expanded strongly in January and February, and the unemployment rate was at its 50‑year low of 3.5 percent in February. Meanwhile, the labor force participation rate and the employment-to-population ratio edged up on net. Initial claims for unemployment insurance benefits—a timely indicator of a deterioration in labor market conditions—remained near historically low levels through early March, which was still before economic shutdowns started to take place in the United States. Nominal wage growth was moderate on balance. Average hourly earnings for all employees increased 3 percent over the 12 months ending in February. The employment cost index for private-sector workers increased 2.7 percent over the 12 months ending in December, while total labor compensation per hour in the business sector—a highly volatile measure of wage gains—rose 3.6 percent over the four quarters of last year.Total consumer prices, as measured by the PCE price index, increased 1.7 percent over the 12 months ending in January. Core PCE price inflation (which excludes changes in consumer food and energy prices) was 1.6 percent over that same 12-month period. The trimmed mean measure of 12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas was 2.1 percent in January. The consumer price index (CPI) rose 2.3 percent over the 12 months ending in February, and the core CPI increased 2.4 percent over that same period. Recent readings on survey-based measures of longer-run inflation expectations were little changed, on balance, in recent months. The Survey of Professional Forecasters measure for the next 10 years was unchanged in the first quarter, as was the longer-run measure from the Blue Chip survey in March. The University of Michigan Surveys of Consumers measure for the next 5 to 10 years edged down in February and remained in the lower part of its prevailing range in early March. The three-year-ahead measure from the Federal Reserve Bank of New York's Survey of Consumer Expectations edged up in February and remained in its recent range.Real PCE growth was moderate in January. The components of the nominal retail sales data used to estimate PCE edged down in February, and the pace of sales of light motor vehicles in January and February was above its fourth-quarter average. However, the consumer sentiment measure from the Michigan survey started to decline notably in early March, and other daily and weekly sentiment measures—such as the Bloomberg Consumer Comfort Index, the Morning Consult confidence index, and the Rasmussen Consumer Index—were also deteriorating.Both starts and building permit issuance for single-family homes increased in January over their fourth-quarter averages, and starts of multifamily units also moved up. New and existing home sales in January were both above their average fourth-quarter levels.Nominal shipments and new orders of nondefense capital goods excluding aircraft increased solidly in January, although the anticipated resumption of deliveries of the Boeing 737 Max was delayed until later in the year. Nominal business expenditures for nonresidential structures outside of the drilling and mining sector increased in January. The total number of crude oil and natural gas rigs in operation—an indicator of business spending for structures in the drilling and mining sector—was edging up through mid-March and was not yet showing any of the expected falloff from the recent sharp declines in crude oil prices.The available data suggested that manufacturing production moved up in February after edging down in January, leaving the level of factory output little changed, on net, over the past 12 months. Although output in the mining sector—which includes crude oil extraction—had increased in January, available data indicated that output in this sector would decrease in February; the recent sharp declines in crude oil prices pointed to a reduction in mining-sector production over at least the near term.Total real government purchases appeared to be increasing moderately. Federal defense spending rose in January and February, and federal employment was boosted by hiring for the 2020 census. State and local government payrolls expanded strongly in January and February, and nominal construction spending by these governments increased solidly in January.The nominal U.S. international trade deficit narrowed in January, as a steep fall in imports more than offset a decline in exports. The fall in imports, which followed a sizable fourth-quarter decline, was led by lower imports of industrial supplies, automotive products, and capital goods. The decline in exports was driven by lower exports of capital goods and industrial supplies. Available indicators suggested that both exports and imports likely declined in February, in part reflecting disruptions related to the coronavirus outbreak.The pace of economic growth abroad was already subdued before the outbreak. In the advanced foreign economies (AFEs), real GDP growth had slowed sharply at the end of 2019, and indicators pointed to only a modest pickup in economic growth early this year. In the emerging market economies (EMEs), incoming data had been more positive, as indicators for high-tech and manufacturing production in Asian economies outside of China were upbeat, and the effects of social protests in Chile and Hong Kong, along with the effects of the General Motors strike on Mexican economic activity, had faded. By early February, however, the coronavirus outbreak in China brought economic activity in many parts of the country to a standstill. Hubei province, the epicenter of the outbreak and a manufacturing hub, was put under quarantine, and factories across the country were shut down. Foreign economic indicators for the more recent period, following the spread of the virus to the rest of the world, were generally not yet available. However, widespread shutdowns together with lower commodity prices and tighter financial conditions suggested that activity was weakening sharply in most foreign economies.Staff Review of the Financial Situation Concerns about the coronavirus outbreak dominated financial market developments at home and abroad over the intermeeting period. Equity prices, sovereign yields, and the market-implied expected trajectory of the federal funds rate all plummeted, and the volatility of asset prices soared. Late in the intermeeting period, short-term funding markets showed signs of stress, with elevated demand for repo funding and increased short-term spreads. Trading conditions for Treasury securities and MBS were impaired. Moreover, primary issuance of investment-grade corporate bonds was sporadic, and that of speculative-grade corporate bonds and leveraged loans virtually stopped after late February. Data from before the escalation of coronavirus concerns in late February suggested that financial conditions for nonfinancial businesses and for households had generally remained supportive of economic activity and spending, but developments late in the intermeeting period pointed to tightening credit conditions.Expectations for the path of the federal funds rate declined sharply over the intermeeting period. Toward the end of the period, a straight read of overnight index swap (OIS) quotes suggested that the federal funds rate would remain below 25 basis points at least until the middle of 2021. After the 50 basis point decrease in the target range on March 3, prices of federal funds futures options suggested that investors assigned a significant probability to the target range decreasing to 0 to 25 basis points at or before the scheduled March meeting.Yields on nominal Treasury securities plummeted across the maturity spectrum, with the 10- and 30-year yields reaching all-time lows at some point. A staff term structure model largely attributed the decline in the 10-year yield to lower expected future short-term rates. Measures of inflation compensation based on Treasury Inflation-Protected Securities fell sharply and reached a historical low at the 5-to-10-year horizon late in the intermeeting period.Uncertainty regarding future interest rates increased sharply over the intermeeting period. At one point, the one-month-ahead swaption-implied volatility of the 10-year swap rate surpassed its highest level seen during the "taper tantrum" episode in mid-2013. Treasury market functioning was severely impaired late in the intermeeting period, with some dealers reportedly unwilling to make markets for clients and the normal linkage between cash and futures markets broken. Market depth was extremely thin, and bid-ask spreads widened sharply.Broad stock price indexes plummeted because of a flight to safety amid escalating concerns about global economic activity. Although the declines were broad based, the airline, energy, and bank sectors were among the worst performers. Stock price indexes were extremely volatile, and the one-month option-implied volatility on the S&P 500 index soared, sometimes reaching levels not seen since the fall of 2008. Corporate bond spreads over comparable-maturity Treasury yields widened significantly, and spreads on speculative-grade energy bonds widened especially sharply amid plunging oil prices.The 50 basis point decrease in the target range for the federal funds rate announced on March 3 passed through fully to overnight unsecured and secured rates. Conditions in domestic short-term funding markets showed signs of funding strains late in the intermeeting period. The rates on unsecured CP and negotiable certificates of deposit with maturities exceeding one month increased sharply relative to OIS rates, with pronounced effects for issuers in the energy and transportation sectors. Overnight and term repo rates were elevated late in the intermeeting period, and the take-up of the Federal Reserve's repo operations increased substantially for both overnight and term operations.Over the intermeeting period, foreign risk asset prices plummeted amid a rapid deterioration of investor sentiment due to the global spread of the coronavirus. Major foreign equity indexes dropped sharply over the intermeeting period, while option-implied volatility measures climbed to their highest levels since the Global Financial Crisis. EME fund outflows accelerated late in the period as emerging market bond spreads widened notably. Most AFE long-term sovereign yields ended the period notably lower. Inflation compensation in the euro area reached new lows. In response to the economic effect of the virus, several central banks cut policy rates and injected liquidity.The broad dollar index strengthened notably over the period, boosted by safe-haven demand, predominantly against EME currencies, and despite a significant decline in U.S. yields. Safe-haven demand also bolstered the Japanese yen and Swiss franc. Policy actions by Chinese authorities supported the Chinese renminbi, which depreciated about 1.5 percent against the dollar on net. Other EME currencies, such as the Brazilian real and Mexican peso, depreciated sharply, as market participants viewed them as particularly vulnerable to a global economic slowdown and declining commodity prices. Oil prices declined over 40 percent on expectations of lower demand due to the virus outbreak and an unexpected price cut by Saudi Arabia amid a breakdown of negotiations between OPEC and Russia to reduce production levels.Financing conditions for nonfinancial firms were strained over the late part of the intermeeting period. After robust issuance earlier in the first quarter, corporate bond issuance came to a near standstill around late February in the midst of elevated volatility following the escalation of concerns about the coronavirus outbreak. Later in the intermeeting period, investment-grade bond issuance resumed intermittently, but speculative-grade issuance and leveraged loan issuance virtually stopped. In addition, some firms reportedly postponed plans to go public. Commercial and industrial loan growth was modest. Credit quality indicators for nonfinancial corporations had been solid earlier in the quarter but deteriorated following the escalation of the coronavirus outbreak, particularly for the speculative-grade and energy segments of the market. Measures of the year-ahead expected default rate increased in March to levels slightly under those observed during the oil price plunge in early 2016, reflecting higher expected default rates among speculative-grade firms as well as energy firms. In addition, the outlook for corporate earnings deteriorated somewhat, as equity analysts revised down their earnings per share estimates a notch, and several firms warned that the coronavirus outbreak could hurt their earnings and make them difficult to predict. The supply of credit to small businesses over the fourth quarter of last year had remained relatively accommodative, but loan originations ticked down in January, consistent with ongoing reports of weak loan demand.Market turmoil spilled into municipal bond markets late in the intermeeting period, as spreads widened substantially and some borrowers became hesitant to come to the market. Credit conditions in the municipal market had been accommodative over the early part of the intermeeting period, and issuance volumes in late February were reportedly boosted by strong investor demand for low-risk assets.Financing conditions in the commercial real estate (CRE) sector worsened late in the intermeeting period, as issuance of CMBS slowed and spreads widened notably to around levels seen in 2016. Data from before the escalation of concerns over the coronavirus outbreak pointed to accommodative financing conditions. CRE loan growth at banks remained solid through February and CRE debt outstanding increased modestly through mid-February, according to available data.The primary mortgage rate increased sharply toward the end of the period as MBS market liquidity deteriorated, after falling substantially in February and early March. Capacity constraints at mortgage originators reportedly intensified, while borrower interest in refinancing increased significantly from already elevated levels. Moreover, additional constraints emerged as it became more difficult to conduct operations that usually happen face-to-face.Financing conditions in consumer credit markets worsened late in the intermeeting period. Strains began appearing in consumer ABS markets, although less so than in other fixed-income markets. In March, consumer ABS spreads widened sharply, liquidity deteriorated, and new issuance became sporadic. Lenders in consumer credit markets began developing programs to assist borrowers whose finances were affected by the outbreak. Earlier in the intermeeting period, financing conditions had been generally supportive of growth. Credit card balances and auto loan balances both appeared to grow solidly through February, according to banks' data, continuing their growth in the fourth quarter. Conditions for subprime credit card borrowers remained relatively tight but showed some signs of easing.Staff Economic Outlook The projection for the U.S. economy prepared by the staff for the March FOMC meeting was downgraded significantly from the January meeting forecast in response to news on the spread of the coronavirus at home and abroad and in response to a related substantial markdown of the staff's foreign economic outlook, along with recent financial market movements. Real GDP was forecast to decline and the unemployment rate to rise, on net, in the first half of this year. Given the downside risks and the elevated uncertainty about how much the economy would weaken and how long it would take to recover, the staff provided two plausible economic scenarios that spanned a range of possibilities. Importantly, the future performance of the economy would depend on the evolution of the virus outbreak and the measures undertaken to contain it. In one scenario, economic activity started to rebound in the second half of this year. In a more adverse scenario, the economy entered recession this year, with a recovery much slower to take hold and not materially under way until next year. In both scenarios, inflation was projected to weaken, reflecting both the deterioration in resource utilization and sizable expected declines in consumer energy prices.Participants' Views on Current Conditions and the Economic Outlook Participants noted that the coronavirus outbreak was harming communities and disrupting economic activity in many countries, including the United States, and that global financial conditions had also been significantly affected. Participants expressed their deep concern for those whose health had been harmed and observed that the matter was, above all, a public health emergency. They commented that the measures—such as social distancing—taken in response to the pandemic, while needed to contain the outbreak, would nevertheless take a toll on U.S. economic activity in the near term.Participants noted that available economic data showed that the U.S. economy came into this challenging period on a strong footing. Information received since the Committee met in January indicated that the labor market remained strong through February and that economic activity rose at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had risen at a moderate pace, business fixed investment and exports had remained weak; furthermore, in recent weeks the energy sector had come under stress due to the sharp drop in oil prices. On a 12-month basis, overall inflation and inflation for items other than food and energy had been running below 2 percent. Survey-based measures of longer-term inflation expectations had been little changed. However, market-based measures of inflation compensation had declined.All participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain. Many participants had repeatedly downgraded their outlook of late in response to the rapidly evolving situation. All saw U.S. economic activity as likely to decline in the coming quarter and viewed downside risks to the economic outlook as having increased significantly. Participants noted that the timing of the resumption of growth in the U.S. economy depended on the containment measures put in place, as well as the success of those measures, and on the responses of other policies, including fiscal policy.With regard to households' behavior, participants noted that, although consumption spending had been a key driver of growth in economic activity through the first two months of this year, the pandemic was starting to impair consumer confidence and to exert an adverse effect on household balance sheets. Participants reported that wide-ranging social-distancing measures were in operation or in prospect in their Districts. These measures—which included temporary closures of some physical locations, such as stores and restaurants, in which consumers purchased goods and services—would have the effect of reducing in-person transactions by households. Online shopping could substitute for some of this activity but was unlikely to replace it fully. The housing market was likely to be disrupted by social distancing, by financial uncertainty—including difficulties that households and businesses would face in meeting mortgage or rental payments—and by volatility in the market for MBS. Participants stressed the major downside risk that the spread of the virus might intensify in those areas of the country currently less affected, thereby sidelining many more U.S. workers and further damping purchases by consumers. Participants expressed concern that households with low incomes had less of a savings buffer with which to meet expenses during the interruption to economic activity. This situation made those households more vulnerable to a downturn in the economy and tended to magnify the reduction in aggregate demand associated with the nation's response to the pandemic.Participants relayed reports on business sectors already badly hit by the response to the coronavirus outbreak. These sectors included those affected by the cancellation of many events, decisions by firms and households to reduce travel, government-mandated reductions in entry from abroad, and cutbacks on economic activity that required in-person interaction. Firms directly affected included those connected to air travel, cruise lines, hotels, tourism services, sports and recreation, entertainment, hospitality, and restaurants. In the past week, pullbacks in purchases at retail stores, except for emergency buying, had reportedly intensified significantly. In addition, the energy sector had come under stress because of recent large declines in oil prices. Many U.S. businesses had moved to telework arrangements; other businesses, however, could not readily shift to telework status or had limited telework technology. Participants observed that the coronavirus outbreak had inevitably hurt business confidence and that the expected length and severity of the restrictions on economic activity that involved in-person interaction would importantly affect the size of the response of investment spending to the situation. Participants expressed concern about the financial strain that many U.S. firms were under because of the loss of business and the extraordinary turbulence in financial markets. With regard to supply chains, many contacts had reported that some linkages in China had been restored and that they were able to draw on inventory supplies and on alternative supply chains; however, in some areas of the country, the construction industry had reported continuing disruptions to supply chains from China. Participants indicated that disruptions in the European economy and recent restrictions on travel from Europe to the United States would adversely affect the U.S. economy's supply chains; so too, if it eventuated, would a large increase in U.S. worker unavailability because of health reasons. Several participants emphasized concern about the capacity of the health care system in the current situation and welcomed measures taken to prevent the system's overall capacity from being exceeded.Participants noted that foreign economic growth for the first half of this year would be badly hit by the severe disruptions to economic activity abroad associated with the response to the coronavirus outbreak, including the recent measures taken in major European countries. However, some encouraging signs had come from China in recent weeks in the form of indications of increasing production and of more purchases of U.S. goods.With regard to the labor market, participants noted that some firms would likely need to cut employment immediately. Other firms, however, were looking for ways to retain employees during the period of reduced economic activity, in order to maintain capacity and be able to ramp up production once the public health crisis abated and demand rebounded. Measures that reportedly helped partially substitute for layoffs included the encouragement by employers of voluntary leaves of absence, non-replacement of departing workers, and increased reliance on the delivery of goods to customers in place of on-site purchases. Participants observed that businesses would be more likely to lay off workers on a major scale if the downturn in economic activity came to be perceived as likely to be protracted. Participants commented that workers most severely affected in the current situation were those who were ill, those with low incomes, those connected to the most hard-hit sectors, and those with irregular or contingent employment. They also noted that many workers had jobs that did not permit working from home.With regard to inflation, participants noted that it had been running below the Committee's 2 percent longer-run objective before the coronavirus outbreak. They remarked that a stronger dollar, weaker demand, and lower oil prices were factors likely to put downward pressure on inflation in the period ahead and observed that this meant that the return of inflation to the Committee's 2 percent longer-run objective would likely be further delayed. Participants indicated, however, that implementing a more accommodative stance of monetary policy at this meeting could be useful in helping offset these factors over time and in achieving the 2 percent inflation objective over the longer run, by helping prevent circumstances of persistent resource slack or a lasting decline in inflation expectations.Participants all agreed that the effects of the pandemic would weigh on economic activity in the near term and that the duration of this period of weakness was uncertain. They further concurred that the unpredictable effects of the coronavirus outbreak were a source of major downside risks to the economic outlook. Participants raised several alternative scenarios with regard to the likely behavior of economic activity in the second half of this year. These scenarios differed from one another in the assumed length and severity of disruptions to economic activity. Several participants emphasized that the temporary nature of the shock to economic activity, the fact that the shock arose in the nonfinancial sector, and the healthy state of the U.S. banking system all implied that the current situation was not directly comparable with the previous decade's financial crisis and it need not be followed by negative effects on economic activity as long-lasting as those associated with that crisis. Participants stressed that measures taken in the areas of health care policy and fiscal policy, together with actions by the private sector, would be important in shaping the timing and speed of the U.S. economy's return to normal conditions. Participants agreed that the Federal Reserve's efforts to relieve stress in financial markets would help limit downside near-term outcomes by supporting credit flows to households and businesses, and that a more accommodative monetary policy stance would provide support to economic activity beyond the near term. Among the downside risks to this year's U.S. economic outlook, participants prominently cited the possibility of the virus outbreak becoming more widespread than expected. Such an event could lead to more wide-ranging temporary shutdowns, with adverse implications for the production of goods and services and for aggregate demand.With regard to financial developments over the intermeeting period, participants noted that financial markets had exhibited extraordinary turbulence and stresses. Participants commented on the conditions of high volatility and illiquidity characterizing the markets for U.S. Treasury securities, especially off-the-run longer-term securities, and for agency MBS. Participants expressed concern about the disruptions to the functioning of these markets, especially in view of their status as cornerstones for the operation of the U.S. and global financial systems and for the transmission of monetary policy. Participants observed that Federal Reserve operations in recent days had provided some relief with regard to the liquidity problems, but they noted that severe illiquidity continued to prevail in key securities markets. Many participants pointed to other dislocations in funding markets that could impede financial intermediation to households and businesses. They highlighted the acute problems that many firms were facing in issuing CP and corporate bonds. Participants further noted that many businesses were tapping their backup credit lines with commercial banks. Participants also discussed the implications of recent financial market turbulence for money market funds and government bond funds and for debt issuance by state and local governments.In their consideration of monetary policy at this meeting, most participants judged that it would be appropriate to lower the target range for the federal funds rate by 100 basis points, to 0 to 1/4 percent. In discussing the reasons for such a decision, these participants pointed to a likely decline in economic activity in the near term related to the effects of the coronavirus outbreak and the extremely large degree of uncertainty regarding how long and severe such a decline in activity would be. In light of the sharply increased downside risks to the economic outlook posed by the global coronavirus outbreak, these participants noted that risk-management considerations pointed toward a forceful monetary policy response, with the majority favoring a 100 basis point cut that would bring the target range to its effective lower bound (ELB). With regard to monetary policy beyond this meeting, these participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to 1/4 percent until policymakers were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals.A few participants preferred a 50 basis point cut at this meeting and noted that such a decision would provide support to economic activity in the face of the anticipated effects of the coronavirus. These participants preferred to wait until there was greater assurance that the transmission mechanism of monetary policy via financial markets and the supply of credit to households and businesses was working effectively. This would allow fiscal and public health policy responses to the coronavirus outbreak to take hold and preserve the ability of the Committee to lower the target range, which was close to the ELB, in the event of a further deterioration in the economic outlook. In addition, these participants noted that a lowering of the target range by 100 basis points, coming so soon after the reduction of 50 basis points less than two weeks earlier, ran the risk of sending an overly negative signal about the economic outlook.Participants also considered open market operations to purchase Treasury securities and agency MBS to support the smooth functioning of these securities markets, which in turn would help support the supply of credit to households and businesses. Participants generally agreed that, over the coming months, it would be appropriate to increase the Federal Reserve's holdings of Treasury securities by at least $500 billion and its holdings of agency MBS by at least $200 billion. Additionally, all principal payments from the Federal Reserve's holdings of agency debt and agency MBS would be reinvested in agency MBS. Those Treasury and agency MBS purchases would be in addition to the recently expanded overnight and term repo operations conducted by the Desk. Participants stressed that it was important to communicate that the Committee would be prepared to increase the size of the securities purchases, as needed, on the basis of its close monitoring of market conditions. Some participants noted that it was important to stress in communications that the primary purpose of these asset purchases was to support the smooth functioning of Treasury and agency MBS markets rather than to provide further monetary policy accommodation by pushing down longer-term yields. A couple of participants noted that because some of the purchases would be at longer maturities, the purchases could provide some accommodation by lowering longer-term yields.Participants discussed some of the possible communications challenges associated with the Committee's policy decisions at this meeting. Several participants noted that it would be important to communicate clearly and consistently about the rationale for the policy decisions taken at this meeting. Some participants remarked that the Committee's policy actions regarding the target range and balance sheet could be interpreted as conveying negative news about the economic outlook. A few participants also remarked that lowering the target range to the ELB could increase the likelihood that some market interest rates would turn negative, or foster investor expectations of negative policy rates. Such expectations would run counter to participants' previously expressed views that they would prefer to use other monetary policy tools to provide further accommodation at the ELB. Additionally, several participants remarked that the public might view the ability of the Committee to provide further monetary policy accommodation as being limited. However, some participants noted that the Committee would still be able to provide monetary policy accommodation even after lowering the target range for the federal funds rate to the ELB. In particular, new forward guidance or balance sheet measures could be introduced.Participants also indicated strong support for related actions taken by the Board of Governors to support the credit needs of households and businesses:Participants also indicated support for enhancing, in coordination with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank, the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. The pricing on the standing U.S. dollar swap arrangements would be lowered by 25 basis points so that the new rate would be the U.S. dollar OIS rate plus 25 basis points, and U.S. dollars would be offered by foreign central banks with an 84-day maturity, in addition to the 1-week maturity operations. Following this discussion, the Chair indicated that these changes to the standing U.S. dollar liquidity swap line arrangements would be implemented consistent with the procedures described in the Authorization for Foreign Currency Operations.Participants generally commented that these additional measures would be helpful in supporting the flow of credit to households and businesses. A few participants commented that stigma associated with the discount window may still be present or that further action, such as a relaunch of the Term Auction Facility, might be needed to encourage banks to take up additional funding. A few other participants noted that discount window stigma should be less of a concern than it was previously. In particular, these participants cited the lowering of the primary credit rate to the top of the target range for the federal funds rate, offering term funding for up to 90 days, and regulators encouraging banks to use the discount window to continue prudently lending to households and businesses. Several participants commented that banks should be discouraged from repurchasing shares from, or paying dividends to, their equity holders in the wake of the proposed measures. Participants generally noted that other measures to support the flow of credit to households and businesses, including those that relied on section 13(3) of the Federal Reserve Act, might be needed in such an uncertain and rapidly evolving environment and that it would be prudent for the Federal Reserve to develop and remain prepared to implement such measures.Committee Policy Action In their discussion of monetary policy for this meeting, members noted that the coronavirus outbreak had harmed communities and disrupted economic activity in many countries, including the United States, and that global financial conditions had also been significantly affected. Available economic data showed that the U.S. economy came into this challenging period on a strong footing, with a strong labor market, a low unemployment rate, and moderate growth in household spending, although business fixed investment and exports had remained weak. More recently, the energy sector had come under stress. On a 12-month basis, overall inflation and inflation for items other than food and energy were running below 2 percent. Market-based measures of inflation compensation had declined, and survey-based measures of longer-term inflation expectations were little changed.Members judged that the effects of the coronavirus would weigh on economic activity in the near term and would pose risks to the economic outlook. In light of these developments, almost all members agreed to lower the target range for the federal funds rate to 0 to 1/4 percent. These members expected that the target range would be maintained at this level until they were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals. One member preferred to lower the target range by 50 basis points, to 1/2 to 3/4 percent, at this meeting, in support of the actions taken to promote smooth market functioning and the flow of credit to households and businesses and in light of the anticipated effects of the coronavirus on economic activity and the economic outlook. In this participant's view, a 50 basis point cut would preserve space for further cuts in the target range that could be implemented when market conditions had improved enough to ensure that the monetary policy transmission mechanism was functioning.Members noted that they would continue to monitor the implications of incoming information for the economic outlook, including information related to public health as well as global developments and muted inflation pressures, and that the Committee would use its tools and act as appropriate to support the economy. Members observed that, in determining the timing and size of future adjustments to the stance of monetary policy, the Committee would assess realized and expected economic conditions relative to its maximum-employment objective and its symmetric 2 percent inflation objective. They also agreed that those assessments would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.Members emphasized that the Federal Reserve was prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum-employment and price-stability goals. To support the smooth functioning of markets for Treasury securities and agency MBS that are central to the flow of credit to households and businesses, over coming months the Committee agreed to increase its holdings of Treasury securities by at least $500 billion and its holdings of agency MBS by at least $200 billion. The Committee also agreed to reinvest all principal payments from the Federal Reserve's holdings of agency debt and MBS in agency MBS. In addition, members noted that the Desk had recently expanded its overnight and term repo operations. Members indicated that they would continue to closely monitor market conditions and that the Committee was prepared to adjust its plans as appropriate.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:"Effective March 16, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent. The Committee directs the Desk to increase over coming months the System Open Market Account holdings of Treasury securities and agency mortgage-backed securities (MBS) by at least $500 billion and by at least $200 billion, respectively. The Committee instructs the Desk to conduct these purchases at a pace appropriate to support the smooth functioning of markets for Treasury securities and agency MBS.The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations to ensure that the supply of reserves remains ample and to support the smooth functioning of short-term U.S. dollar funding markets. In addition, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 0.00 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.The Committee directs the Desk to continue rolling over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and to reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month in agency mortgage-backed securities. Small deviations from these amounts for operational reasons are acceptable.The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions."The vote also encompassed approval of the statement below for release at 5:00 p.m.:"The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. Available economic data show that the U.S. economy came into this challenging period on a strong footing. Information received since the Federal Open Market Committee met in January indicates that the labor market remained strong through February and economic activity rose at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending rose at a moderate pace, business fixed investment and exports remained weak. More recently, the energy sector has come under stress. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. This action will help support economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals. To support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities that are central to the flow of credit to households and businesses, over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion. The Committee will also reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Open Market Desk has recently expanded its overnight and term repurchase agreement operations. The Committee will continue to closely monitor market conditions and is prepared to adjust its plans as appropriate."Voting for this action: Jerome H. Powell, John C. Williams, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Patrick Harker, Robert S. Kaplan, Neel Kashkari, and Randal K. Quarles.Voting against this action: Loretta J. MesterPresident Mester was fully supportive of all of the actions taken to promote the smooth functioning of markets and the flow of credit to households and businesses but voted against the FOMC action because she preferred to reduce the target range for the federal funds rate to 1/2 to 3/4 percent at this meeting.Consistent with the Committee's decision to lower the target range for the federal funds rate to 0 to 1/4 percent, the Board of Governors voted unanimously to lower the interest rate paid on required and excess reserve balances to 0.10 percent and voted unanimously to approve a 1-1/2 percentage point decrease in the primary credit rate to 0.25 percent, effective March 16, 2020.The Board also approved changes to allow Reserve Banks to extend primary credit loans for as long as 90 days and that could be prepaid or renewed on request. In addition, the Board approved a reduction in reserve requirement ratios applicable to net transaction deposits above the exemption threshold to 0 percent effective with the reserve maintenance period beginning on March 26, 2020.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, April 28–29, 2020. The meeting adjourned at 2:40 p.m. on March 15, 2020.Notation Vote By notation vote completed on February 18, 2020, the Committee unanimously approved the minutes of the Committee meeting held on January 28–29, 2020.Videoconference meeting of March 2 A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on March 2, 2020, at 7:30 p.m. to review developments related to the outbreak of the coronavirus and discuss steps that could be taken to provide support to the economy. As background for the Committee's discussion, the staff reviewed recent developments in financial markets and provided an assessment of the evolving risks to the economic outlook.The SOMA manager noted that since mid-February when concerns about the spread of the coronavirus beyond China had begun to intensify, global risk asset prices and sovereign yields had declined sharply. U.S. and global equity indexes were lower than at the time of the Committee's meeting in January and implied equity market volatility had risen to levels not seen since 2015. The deterioration in risk sentiment had also been reflected in a significant widening in U.S. and European corporate credit spreads and in peripheral European spreads. Amid the ongoing market volatility, issuance of investment-grade and high-yield corporate bonds and of leveraged loans had generally dried up. Money markets had been resilient during the broader financial market volatility; pricing and trading conditions in offshore U.S. dollar funding markets had also been stable. Market functioning had remained orderly despite deterioration in liquidity conditions in Treasury, equity, and credit markets.Financial market participants' views on the likely course of U.S. monetary policy had changed since the Committee's January meeting. The expected path of the federal funds rate embedded in futures prices had shifted down significantly over the period. Market commentary had interpreted Chair Powell's February 28 statement as indicating the FOMC was prepared to lower the target range for the federal funds rate at or before the March meeting to support the achievement of the Committee's maximum employment and price stability goals. Expectations for global monetary and fiscal easing had increased, with some market commentary noting the possibility of a coordinated effort across central banks or fiscal authorities.The SOMA manager noted that the situation remained highly fluid with key risks, including those associated with funding for corporate borrowers, operational vulnerabilities associated with the transition to alternative work arrangements, and the potential for impaired market functioning.The staff then provided an update on current conditions and changes to the economic outlook since the FOMC's January meeting. Available indicators for China suggested that the spread of the coronavirus had been associated with a collapse in economic activity during the first quarter, with spillovers to the global economy from the drop in Chinese demand and disruption of supply chains. Although there were some tentative signs that the coronavirus in China was being contained and production was beginning to resume, the outbreak of the virus in other foreign economies was weighing on consumer and business sentiment and depressing consumption in those countries. All told, foreign economic activity was expected to be significantly weaker during the first half of 2020 than the staff had anticipated at the time of the January FOMC meeting.The staff noted that the spread of the virus was at an earlier stage in the United States and its effects were not yet visible in monthly economic indicators, although there had been some softening in daily sentiment indexes and travel-related transactions. The outlook for real economic activity over the remainder of the year was highly uncertain and depended on the spread of the virus and the measures taken to contain it. Scenarios involving a greater spread of the coronavirus and more severe social-distancing actions would be associated with a greater shutdown of production and disruption of supply chains, larger negative effects on consumer and business sentiment, more significant increases in unemployment, and worsening financial conditions. Reductions in demand, coupled with a stronger U.S. dollar and weaker commodity prices, were expected to put downward pressure on inflation, with the magnitude of the softening in core inflation depending on the severity of the situation.FOMC participants discussed the significant outbreaks of the coronavirus that had emerged recently in a few countries outside China and the likelihood that the virus would spread widely around the world, including in the United States. While the economic outlook at the time of the Committee's January meeting had been favorable, the potential spread of the virus and the measures needed to protect communities from it represented a material downside risk to the U.S. economy. A forceful monetary policy action could provide a clear signal to the public that policymakers recognized the potential economic significance of the situation and were willing to move decisively to support the achievement of the Committee's dual mandate goals and counter the recent tightening of financial conditions. Although a reduction in the policy rate would not slow the spread of infection or remedy broken supply chains, it could help shore up the confidence of households, businesses, and financial markets; ease financial strains of consumers and firms; and provide meaningful support to the economy in the face of a large shock to demand. Accordingly, participants supported a reduction of 50 basis points in the target range for the federal funds rate.On March 3, 2020, the Committee completed the vote 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:"Effective March 4, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1 to 1-1/4 percent. In light of recent and expected increases in the Federal Reserve's non-reserve liabilities, the Committee directs the Desk to continue purchasing Treasury bills at least into the second quarter of 2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations at least through April 2020 to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation. In addition, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.00 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.The Committee directs the Desk to continue rolling over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and to continue reinvesting all principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month. Principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in Treasury securities to roughly match the maturity composition of Treasury securities outstanding; principal payments in excess of $20 billion per month will continue to be reinvested in agency mortgage-backed securities. Small deviations from these amounts for operational reasons are acceptable.The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions."The vote also encompassed approval of the statement below for release at 10:00 a.m. on March 3, 2020:"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1-1/4 percent. The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy."Voting for this action: Jerome H. Powell, John C. Williams, Michelle W. Bowman, Lael Brainard, Richard H. Clarida, Patrick Harker, Robert S. Kaplan, Neel Kashkari, Loretta J. Mester, and Randal K. Quarles.Consistent with the Committee's decision to lower the target range for the federal funds rate to 1 to 1-1/4 percent, the Board of Governors completed on March 3, 2020, unanimous votes to lower the interest rate paid on required and excess reserve balances to 1.10 percent and to approve a 1/2 percentage point decrease in the primary credit rate to 1.75 percent, effective March 4, 2020._______________________James A. Clouse Secretary1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes. Return to textBoard of Governors of the Federal Reserve System20th Street and Constitution Avenue N.W., Washington, DC 20551
drag me to text box!FOMC Minutes 2020 03 15WASHINGTON–The Financial Crimes Enforcement Network (FinCEN) will host a special monthly virtual FinCEN Innovation Hours Program on June 10, 2021, focusing on the important role of underserved groups in developing technology to fight illicit financial activity and protect the nation’s security. We encourage participation by financial technology (FinTech) and regulatory technology (RegTech) companies, venture capital and investment firms, and financial institutions majority founded, owned, or managed by underserved groups. FinCEN requests that demonstrations highlight how these innovations work and how financial institutions or business and retail consumers might use them, or how they may support private- and public-sector efforts to enhance our national security. Each meeting will last no longer than an hour. FinCEN announced the Innovation Hours Program on May 24, 2019. The Innovation Hours Program is part of a broader FinCEN Innovation Initiative, which seeks to promote innovation by supporting, where appropriate and feasible, innovation pilot programs, and enhanced feedback and information sharing programs.Interested companies should submit a request online no later than May 10, 2021, and provide applicable background information about their firm’s business and innovative products. Only firms certified under the Small Business Administration Section 8a Business Development Program will be considered for participation in the demonstration sessions. The number of individual demonstration sessions will be limited.###FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorist financing, and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.
drag me to text box!FinCEN to Hold Special Monthly Innovation Hours Sessions for Underserved Groups Developing Technology to Fight Illicit Financial ActivityThe federal banking agencies, in consultation with the Financial Crimes Enforcement Network and the National Credit Union Administration, today issued a joint statement addressing how risk management principles described in the “Supervisory Guidance on Model Risk Management” relate to systems or models used by banks to assist in complying with the requirements of Bank Secrecy Act (BSA) laws and regulations. The statement further notes that it does not alter existing BSA/anti-money laundering (AML) legal or regulatory requirements or establish new supervisory expectations, and that no specific model risk management framework is required.The agencies, along with the National Credit Union Administration and the Financial Crimes Enforcement Network, also announced a request for information (RFI) on the extent to which the principles discussed in the guidance support compliance by banks and credit unions with BSA/AML and Office of Foreign Assets Control requirements. The agencies are seeking comments and information to better understand bank practices and determine whether additional explanation or clarification may be helpful. Comments to the RFI will be accepted for 60 days following publication in the Federal Register. Media Contacts:Federal Reserve Darren Gersh (202) 452-2955FDIC Brian Sullivan (202) 412-1436FinCEN Candice Basso (703) 905-3770NCUA Joseph Adamoli (571) 645-6636 OCC Stephanie Collins (202) 649-6870
drag me to text box!Agencies Issue Statement and Request for Information on Bank Secrecy Act/Anti-Money Laundering ComplianceWASHINGTON—Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco today announced several leadership changes impacting the bureau. Director Blanco announced he will depart FinCEN on April 9, after serving as the organization’s director since December 2017. Michael Mosier, former FinCEN Deputy Director and current Counselor to the Deputy Secretary of the Treasury, will return to FinCEN as Acting Director. AnnaLou Tirol, former Associate Director of FinCEN’s Strategic Operations Division, is serving as FinCEN Deputy Director."Serving as FinCEN’s eighth Director has been a wonderful and rewarding experience for me," said Director Blanco. "I am proud to have led an incredible organization with an important national security mission that has a profound effect on the lives of so many people, especially the most vulnerable in our society. I have every confidence in Mr. Mosier and Ms. Tirol’s ability to lead the bureau forward and continue the progress of ensuring our national security and protecting people from harm. They are skilled professionals with extensive experience safeguarding the American people. Their proven leadership at FinCEN and in other parts of government, combined with their vast relationships across the U.S. government and the national security enterprise, will ensure continuity as FinCEN implements the historic and sweeping Anti-Money Laundering Act of 2020 while remaining a pacesetter in innovation and industry regulation."Mr. Mosier will serve as Acting Director effective April 11, 2021. Mr. Mosier most recently served as Counselor to the Deputy Secretary of the Treasury, a role he assumed last month after serving as FinCEN’s Deputy Director and first Digital Innovation Officer. Mr. Mosier previously worked at the cryptocurrency analytics, compliance, and investigations firm Chainalysis, where he was Chief Technical Counsel. Prior to FinCEN and Chainalysis, Mr. Mosier was an Associate Director at Treasury’s Office of Foreign Assets Control. Mr. Mosier has also served as a Deputy Chief in the Department of Justice’s (DOJ’s) Money Laundering & Asset Recovery Section. He also served a tour at the White House National Security Council as Director for Transnational Organized Crime. Mr. Mosier began his public service as a prosecutor with the Manhattan District Attorney’s Office, and has served as an Adjunct Professor of Law at Georgetown University Law Center. He previously worked at a law firm representing technology, media, and financial services clients.Ms. Tirol is now serving as Deputy Director. In this capacity, she assists in overseeing FinCEN’s wide-ranging work to enhance the national security of the United States. Ms. Tirol joined FinCEN in September 2019, serving as Associate Director of the Strategic Operations Division, where she worked extensively to promote FinCEN’s strategic partnerships with government and private industry stakeholders, both domestically and internationally. Ms. Tirol came to FinCEN after overseeing DOJ’s Public Integrity Section prosecuting public corruption matters. She began her public service as an Assistant U.S. Attorney in San Diego, and has served overseas tours for DOJ in Belgrade, Serbia, focusing on anti-corruption issues, and in Panama City, Panama, focusing on anti-money laundering and countering the financing of terrorism. Ms. Tirol is an Adjunct Professor of Law at Georgetown University Law Center. The mission of the Financial Crimes Enforcement Network is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorist financing, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.
drag me to text box!FinCEN Announces Acting Director and New Deputy Director