The group says the outlook is "concerning" if no further interventions or behavioural changes take place.By Alix Culbertson, news reporter Friday 30 October 2020 18:15, UKEngland has breached its "reasonable worst-case" scenario for COVID-19 infections and hospital admissions, the government's scientific advisers have said.The Scientific Advisory Group for Emergencies (SAGE) also warned that the number of daily deaths in England is in line with that scenario, but "is almost certain to exceed this within the next two weeks".Their warning came in the latest meeting of the group's Scientific Pandemic Influenza Group on Modelling (SPI-M-O) on 14 October, whose minutes were released on Friday. They said the reasonable worst-case planning scenario is not a forecast of what is to happen but is used to help plan for COVID-19 during the winter.If the number of new infections falls in the "very near future", this exceedance of the reasonable worst-case scenario "might only continue for three to four weeks", the group said."But, if R remains above 1 then the epidemic will further diverge from the planning scenario."Since then, the R number - the average number of people one person with COVID-19 infects - has remained over 1.And in Greater Manchester, most hospital trusts there could exceed their critical care capacity by next week due to high COVID-19 hospital admissions, according to an internal NHS document leaked to The Independent.The prime minister last appeared at Downing Street coronavirus briefing more than a week ago on 22 October.New infections doubling every 10-15 daysSPI-M-O warned new infections across the UK are doubling every 10 to 15 days."There is complete consensus in SPI-M-O that the current outlook for the epidemic's trajectory is concerning, if there are no widespread decisive interventions or behavioural changes in the near term," the group said.In England, modelling suggests there is an average of 43,000 to 74,000 new infections per day - significantly above the reasonable worst-case scenario of between 12,000-13,000 throughout October.A swabbing survey by the Office for National Statistics (ONS) estimated that an average of 336,500 people had COVID-19 in the community - not in hospitals or care homes - in the week up to 8 October, with 27,900 new infections each day.In Wales, an average of 7,900 people had COVID-19 during that week - but the group said it is "highly likely" both countries have seen a daily increase since then.South West has highest R number and daily growth rateLooking at England's regions, the group found that despite the South West being touted as having one of the lowest rates, it had the highest R number and daily growth rate.The estimates showed the region had an R number of 1.3-1.6 and a daily growth rate of between +6% and +10%, with the South East and East of England following close behind. On the flip side, London had the lowest, with its R number at 1.1-1.4 and a daily growth rate of between +2% and +5%Testing delays reduce contact tracing effectivenessThe group found that the volume of COVID-19 testing has varied "considerably" over time, depending on the region.It said there was an indication that the distribution of delays in testing has changed "markedly" with increasing demand and having more tests but with further delays would only hinder test and trace efforts."Delays beyond 24 hours result in greatly reduced contact tracing effectiveness," the group said."Increasing the supply of tests will potentially reduce the effectiveness of contact tracing if this results in more delays, particularly the proportion returned within 24 hours." © 2020 Sky UK
drag me to text box!Coronavirus: England has breached 'reasonable worst-case scenario' for cases and hospital admissions, SAGE warnsThe tremor of magnitude 7 was felt across the region, including in Istanbul, and as far as Athens and Bulgaria.Friday 30 October 2020 20:30, UKPlease use Chrome browser for a more accessible video playerAn earthquake has killed at least 19 people and injured 700 in Turkey and on the Greek island of Samos.In Izmir, Turkey's third largest city, 17 people died after the tremor.Latest updates from Turkey and Greece after major earthquakeThe two people killed by the magnitude 7 quake on Samos were a teenage boy and girl found near a collapsed wall.The epicentre of the tremor was in the Aegean Sea, 11 miles (17 km) off the coast of Turkey's Izmir province, at a depth of 10 miles (16km).The shock was felt across the region, including in Istanbul, the Greek islands, and as far as the Greek capital Athens and also in Bulgaria.Water surged into the Seferihisar district south of Izmir, the city home to around 4.5 million people and worst hit by the earthquake.In Izmir, witnesses said people poured onto the streets in panic following the quake. The city's mayor said nearly 20 buildings had collapsed.Please use Chrome browser for a more accessible video playerTurkey's health minister Fahrettin Koca said that 38 ambulances, two helicopters and 35 medical rescue teams were involved in the operation.Footage from the area showed flattened buildings and survivors being pulled from the rubble by emergency workers.Izmir's governor said 70 people had been rescued from the ruins.Student Ilke Cide said he went inland after waters rose following the quake."I am very used to earthquakes... so I didn't take it very seriously at first," he said."But this time it was really scary."Please use Chrome browser for a more accessible video playerA tsunami warning has been issued, with residents on the nearby Greek island of Samos, which has a population of about 45,000, told to stay away from the coast.Water rose above the dock in the main harbour of Samos and flooded the street, and residents were also told to stay away from buildings as aftershocks rattled the area.Please use Chrome browser for a more accessible video playerLocal officials reported damage to buildings and part of the popular holiday island's road network, while eight people were slightly injured and the two teenagers were pronounced dead after being found unconscious in the town of Vathy.Samos' vice-mayor George Dionysiou said: "We have never experienced anything like it. People are panicking."Please use Chrome browser for a more accessible video playerIn a statement, UK Foreign Secretary Dominic Raab said he is "deeply distressed by the scenes of destruction" caused by the earthquake."We stand ready to support our Turkish and Greek friends in any way they need," he said.Greek seismologist Efthymios Lekkas described the tremor as a "very big earthquake", adding that it was "difficult to have a bigger one".On Twitter, Greek Prime Minister Kyriakos Mitsotakis said he had called Turkish President Recep Tayyip Erdogan to offer condolences over the death toll in Izmir.Please use Chrome browser for a more accessible video player"Whatever our differences, these are times when our people need to stand together," he tweeted.The president of the European Council, Charles Michel, said the EU also "stands ready to provide support"."Closely following the developments of the strong earthquake that hit the Aegean Sea off Greece and Turkey. My thoughts are with all the people affected. EU stands ready to provide support," he tweeted.Crisscrossed by major fault lines, Turkey is among the most earthquake-prone countries in the world.More than 17,000 people were killed in August 1999 when a 7.6 magnitude quake struck Izmit, a city southeast of Istanbul.In 2011, a quake in the eastern city of Van killed more than 500. © 2020 Sky UK
drag me to text box!Nineteen dead and more than 700 injured after earthquake strikes Turkey and GreeceStiles played every minute of the 1966 campaign, but sold his medals in later life to leave something for his family.Friday 30 October 2020 21:25, UKPlease use Chrome browser for a more accessible video playerNobby Stiles, a member of England's 1966 World Cup-winning team, has died aged 78.His family said he passed away peacefully after a long illness.Stiles played every minute of the victorious 1966 campaign, and was credited with keeping Portugal legend Eusebio quiet during the semi-final.His post-match celebration after the Wembley final, in which England beat West Germany 4-2, saw him holding the World Cup trophy in one hand and his false teeth in the other.Stiles was also part of the Manchester United side which became the first English club to win the European Cup two years later when they beat Benfica in the final - again at Wembley.Domestically, the tough-tackling holding midfielder won league titles with the Red Devils in 1965 and 1967.Another member of the 1966 England squad, Sir Geoff Hurst, said Stiles was the "heart and soul of the team", adding that he was "hugely sad" to hear of his passing.Former England goalkeeper Peter Shilton said Stiles was a "great person who I admired very much".Manchester United said their former player was a "titan of the club's history, cherished for his heart and personality on and off the pitch".Stiles was born during a Second World War air raid in Collyhurst, Manchester, in May 1942, agreeing apprentice terms with United in 1959.After he left Old Trafford in 1971, he went on to play for Middlesbrough and Preston.Middlesbrough said Stiles - nicknamed the "Toothless Tiger" - was "one of the most colourful characters ever to wear our shirt".He also managed Preston between 1977 and 1981, the Vancouver Whitecaps from 1981 to1984, and West Bromwich Albion between 1985 and 1986.We are extremely saddened to learn of the passing of Nobby Stiles MBE.An integral part of our first-ever European Cup-winning side, Nobby was a titan of the club’s history, cherished for his heart and personality on and off the pitch.He will be sorely missed by us all. pic.twitter.com/aT0Mk47cElWest Brom tweeted: "Farewell to the most famous grin in English football. Rest in peace, Nobby."Stiles returned to United as a youth team coach under Sir Alex Ferguson in 1989.He was diagnosed with dementia in later life, and after a mini-stroke in 2010, decided to sell his medals in order to leave something to his family.United bought them for £200,000 and they are part of the club's museum.Analysis by Martha Kelner, sports correspondentThe image of Nobby Stiles parading around Wembley, false teeth in one hand and the Jules Rimet trophy in the other is one of the most joyous in English football history. The odds were stacked against Stiles making it as a footballer; born in the cellar of the family home which became an air raid shelter during World War II, he was severely short sighted and only 5ft6in tall. But it was his tough tackling, tenacity and team spirit which saw him secure 28 caps for England and a European Cup for Manchester United. He also coached at Old Trafford during Sir Alex Ferguson's reign, acting as a mentor to the class of 92, including David Beckham and Gary Neville. But his family felt he had been let down by the club and the wider football family in later life. Financial struggles meant he had to sell his World Cup winner's medal and memorabilia at auction in 2010. He also developed the first effects of dementia aged just 61, a cruel disease which robbed him of his speech towards the end. His family want more research into the link between footballers and neurological disease. A study in 2019 found former professional footballers were 3.5 times more likely to suffer from dementia than the general population. But Stiles' loved ones say research should have come earlier and been even wider reaching. With his death, football may be forced to examine whether it failed one of its most famous sons. © 2020 Sky UK
drag me to text box!Nobby Stiles: Member of England's World Cup-winning team dies aged 78The 1966 star developed dementia aged just 61 - and his family want more research on the link between brain diseases and the game.Friday 30 October 2020 22:25, UKNobby Stiles, who won the World Cup with England in 1966, has died at the age of 78.Here, two Sky News correspondents reflect on his life and career.Martha Kelner, sports correspondentThe image of Nobby Stiles parading around Wembley, false teeth in one hand and the Jules Rimet trophy in the other, is one of the most joyous in English football history.The odds were stacked against Stiles making it as a footballer; born in the cellar of the family home which became an air raid shelter during World War II, he was severely short sighted and only 5ft6in tall.But it was his tough tackling, tenacity and team spirit which saw him secure 28 caps for England and a European Cup for Manchester United.He also coached at Old Trafford during Sir Alex Ferguson's reign, acting as a mentor to the class of '92, including David Beckham and Gary Neville.But his family felt he had been let down by the club and the wider football family in later life.Financial struggles meant he had to sell his World Cup winner's medal and memorabilia at auction in 2010.He also developed the first effects of dementia aged just 61 - a cruel disease which robbed him of his speech towards the end.His family want more research into the link between footballers and neurological disease. A study in 2019 found former professional footballers were 3.5 times more likely to suffer dementia than the general population.But Stiles' loved ones say research should have come earlier and be even wider reaching.With his death, football may be forced to examine whether it failed one of its most famous sons.Nick Powell, sports editorIt was the teeth that did it. Or rather the gap.Nobby Stiles played fewer England games - 28 - than any of his 1966 World Cup winning teammates, but his toothless, trophy-clutching jig round Wembley is an enduring image of that day.Others ran the sprints, scored the goals, took the glory, but Norbert Stiles, as manager Sir Alf Ramsey always called him, played a giant part in England reaching their only global final.I still remember my father declaring, when it became known that England would face Portugal in their semi-final: "I'll eat my hat if we see off Eusebio."Eusebio was Portugal's playmaker and the tournament's standout star, after Brazilian legend Pele was injured and his team eliminated.Ramsey set tough-tackling Stiles on him; Eusebio was impotent, despite a late penalty, and England were through to their first - and still only - World Cup final.The 5'6" midfielder was not everyone's cup of tea.He could read the game, had boundless energy and rarely lost a tackle. But what his supporters saw as combative was, to others, just brutal.No matter. Ramsey loved him.So did Sir Matt Busby, under whose management Stiles helped Manchester United become the first English European Cup winners in 1968 - once more against Eusebio and his club Benfica.He played almost 400 games for United, and tried his hand at management, but still that one July day 54 years ago defines him.His passing leaves just four of the victorious 11 still alive: right-back George Cohen and the three forwards who between them scored all but one of the goals in the tournament: Sir Bobby Charlton, Roger Hunt and hat-trick man Sir Geoff Hurst.Stiles was in a way the embodiment of the Ramsey philosophy - omit individual brilliance if need be but create the best team, and ignore the critics (of which there were plenty).Pre-tournament, only Bobby Charlton and to a lesser extent captain Bobby Moore and goalkeeper Gordon Banks were world stars.People ridiculed Ramsey for declaring England would be victorious in 1966, and it's fair to say not many opposing managers would have had Stiles near the top of their concerns.But Ramsey and his toothless tackler had the last laugh. © 2020 Sky UK
drag me to text box!Nobby Stiles: Did football fail one of its most famous sons?Consumer 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 15Consumer Resources April 28–29, 2020 A joint meeting of the Federal Open Market Committee and the Board of Governors was held by conference call on Tuesday, April 28, 2020, at 1:00 p.m. and continued on Wednesday, April 29, 2020, at 9:00 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, Charles L. Evans, and Michael Strine, 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, 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 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,2 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, Wendy E. Dunn, Ellen E. Meade, Chiara Scotti, and Ivan Vidangos, Special Advisers to the Board, Office of Board Members, Board of GovernorsLinda Robertson, Assistant to the Board, Office of Board Members, Board of GovernorsBrian M. Doyle, Senior Associate Director, Division of International Finance, Board of Governors; John J. Stevens, Senior Associate Director, Division of Research and Statistics, Board of GovernorsEdward Nelson, Senior Adviser, Division of Monetary Affairs, Board of GovernorsMarnie Gillis DeBoer and Min Wei, Associate Directors, Division of Monetary Affairs, Board of Governors; Glenn Follette, Associate Director, Division of Research and Statistics, Board of GovernorsEric C. Engstrom, Deputy Associate Director, Division of Monetary Affairs, Board of Governors; Patrick E. McCabe and John M. Roberts, Deputy Associate Directors, Division of Research and Statistics, Board of Governors; Andrea Raffo, Deputy Associate Director, Division of International Finance, Board of Governors; Jeffrey D. Walker,2 Deputy Associate Director, Division of Reserve Bank Operations and Payment Systems, Board of GovernorsBrian J. Bonis and Rebecca Zarutskie, Assistant Directors, Division of Monetary Affairs, Board of Governors; Ricardo Correa, Assistant Director, Division of International Finance, Board of GovernorsPenelope A. Beattie,2 Section Chief, Office of the Secretary, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsMichele Cavallo, Edward Herbst, and Ander Perez-Orive, Principal Economists, Division of Monetary Affairs, Board of GovernorsRandall A. Williams, Senior Information Manager, Division of Monetary Affairs, Board of GovernorsRon Feldman, First Vice President, Federal Reserve Bank of MinneapolisDavid Altig, Kartik B. Athreya, Sylvain Leduc, Daleep Singh, and Christopher J. Waller, Executive Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, San Francisco, New York, and St. Louis, respectivelySpencer Krane, Senior Vice President, Federal Reserve Bank of ChicagoScott Frame, Anna Kovner, Giovanni Olivei, and Patricia Zobel, Vice Presidents, Federal Reserve Banks of Dallas, New York, Boston, and New York, respectivelyA. Lee Smith, Research and Policy Advisor, Federal Reserve Bank of Kansas CityDevelopments in Financial Markets and Open Market Operations The System Open Market Account (SOMA) manager first discussed developments in financial markets. Financial conditions had shown notable improvement over recent weeks. Equity price indexes were up substantially from the lows of late March, safe-haven demands for the dollar had receded, and measures of realized and implied volatility across markets had diminished. Market participants pointed to swift and forceful actions taken by the Federal Reserve, coupled with strong fiscal measures, and some indications of a slowing in the spread of the coronavirus (COVID-19) in major economies as factors contributing to these developments.That said, market participants remained very uncertain about the economic outlook, and contacts highlighted an array of remaining risks, including those in corporate credit markets, emerging markets, and mortgage markets. In corporate credit markets, concerns about potential defaults were rising, and ratings agencies had put on negative watch or downgraded many issuers. In emerging markets, the steep decline in commodity prices was exacerbating financial pressures for some emerging market economies (EMEs), which were also facing strains arising from capital outflows and a reduction in trade activity. And in mortgage markets, the likely increase in mortgage delinquencies associated with forbearance polices and an eventual rise in defaults were sources of concern for bank and nonbank lenders.Open Market Desk surveys suggested that market participants anticipated a sharp near-term decline in economic activity, followed by some recovery later this year. Against this backdrop, market participants generally expected the target range for the federal funds rate to remain at the effective lower bound for the next couple of years. Respondents to Desk surveys attached almost no probability to the FOMC implementing negative policy rates. Some survey respondents indicated that they expected modifications to the Committee's forward guidance, but not at the current meeting.The manager then reviewed recent open market operations. Since mid-March, at the direction of the FOMC, the Desk had purchased very large quantities of Treasury and agency mortgage-backed securities (MBS) in order to support the smooth functioning of these critical markets. The Desk evaluated a broad array of indicators to assess market functioning. These indicators suggested considerable improvement in market functioning, and the Desk gradually scaled back the pace of purchases accordingly. Market participants anticipated that the pace of purchases would slow after the June meeting, but they expected that outright securities holdings in the SOMA portfolio would continue to expand at least through the end of the year. The SOMA manager expected that, if conditions continued to improve, the pace of purchases could be reduced somewhat further; however, consistent with the directive, the Desk was prepared to increase purchases as needed should market functioning worsen.Conditions in money markets had improved over recent weeks. The intense strains across a range of short-term funding markets that emerged in March had subsided. The expansion of Federal Reserve repurchase agreement (repo) operations, the enhancement and expansion of funding available through the discount window and swap lines, and the funding provided through the Primary Dealer Credit Facility (PDCF), the Money Market Mutual Fund Liquidity Facility (MMLF), and the Commercial Paper Funding Facility (CPFF) were likely important in relieving pressures across a range of short-term funding markets. The manager noted that, despite these improvements, rates in some term funding markets remained elevated, although forward measures suggested the upward pressure on these rates might ease in coming weeks. With conditions in short-term funding markets having improved substantially and with repo operations no longer needed to maintain ample reserve levels, the manager noted that it might be appropriate to position the Federal Reserve's repurchase operations in a backstop role. For example, the minimum bid rate in repo operations could be increased somewhat relative to the level of the interest rate on excess reserves (the IOER rate).Later in the intermeeting period, short-term interest rates drifted lower and settled at near-zero levels. Although rates appeared stable, the manager suggested that circumstances could arise in which temporarily raising the per-counterparty limit on the overnight reverse repo operation would support policy implementation. The manager also noted that some market participants anticipated that the Federal Reserve might increase the IOER rate in order to move the federal funds rate closer to the middle of the target range and to address market functioning issues that could arise over time with overnight rates at very low levels. However, there appeared to be limited risk that the federal funds rate would move below the target range, as the Federal Home Loan Banks—the dominant lenders in the federal funds market—can earn a zero rate on balances maintained in their account at the Federal Reserve. Moreover, there were few signs to date that the low level of overnight funding rates had adversely affected market functioning, and trading volumes remained robust. The SOMA manager noted that the staff would continue to monitor developments.The Committee voted unanimously to renew the reciprocal currency arrangements with the Bank of Canada and the Bank of Mexico; these arrangements are associated with the Federal Reserve's participation in the North American Framework Agreement of 1994. In addition, the Committee voted unanimously to renew the dollar and foreign currency liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. The votes to renew the Federal Reserve's participation in these standing arrangements occur annually at the April or May FOMC meeting.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The coronavirus outbreak and the measures taken to protect public health were severely disrupting economic activity in the United States and abroad. The available information for the April 28–29 meeting indicated that U.S. labor market conditions deteriorated substantially in March and April, and real gross domestic product (GDP) declined sharply in the first quarter of the year. In addition, a variety of economic indicators were already pointing toward an extraordinary contraction in GDP in the second quarter. 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 February.Job losses surged in March, even though the drop in total nonfarm payroll employment reflected only those changes that had occurred through the mid-month reference period of the establishment survey. In addition, the unemployment rate jumped to 4.4 percent in March, and the labor force participation rate decreased notably. After economic shutdowns started to occur on a widespread basis, initial claims for unemployment insurance benefits skyrocketed in the second half of March through the first half of April, a development that pointed to substantial job losses in April. Nominal wage growth remained moderate, as average hourly earnings for all employees increased 3.1 percent over the 12 months ending in March.Total PCE price inflation and core PCE price inflation, which excludes consumer food and energy prices, both increased 1.8 percent over the 12 months ending in February. The trimmed mean measure of 12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas was 2.0 percent in February. The consumer price index (CPI) rose 1.5 percent over the 12 months ending in March, and the core CPI increased 2.1 percent over the same period. The total CPI rose less than the core CPI mostly because of substantial declines in consumer energy prices, which were reflecting significantly lower crude oil prices. Recent readings on survey-based measures of longer-run inflation expectations were little changed on balance. The University of Michigan Surveys of Consumers measure for the next 5 to 10 years edged up in April, and the 3‑year‑ahead measure from the Federal Reserve Bank of New York's Survey of Consumer Expectations edged down in March; both measures remained in their recent ranges.Real PCE declined steeply in the first quarter of the year. The components of the nominal retail sales data used to estimate PCE, along with the sales of light motor vehicles, fell substantially in March, reflecting the effects of the widespread economic shutdowns. Moreover, the consumer sentiment measures from both the Michigan and the Conference Board surveys deteriorated substantially over March and April. Real disposable personal income was about flat in the first quarter, so the personal saving rate moved up notably with the decline in spending.In contrast to other sectors of the economy, real residential investment expanded strongly in the first quarter as a whole, although housing-sector activity had started to slow dramatically late in the quarter. Starts and building permit issuance for single-family homes, along with starts of multifamily units, tumbled in March. In addition, sales of both new and existing homes contracted sharply in March, and survey measures of builders' sentiment plunged in April.Real business fixed investment slumped in the first quarter following moderate declines over the previous three quarters. Spending for business equipment fell considerably in the first quarter, led by a sharp decrease in purchases of transportation equipment. Business investment in nonresidential structures also dropped notably. The coronavirus outbreak and the effects on economic activity of measures to contain it, together with the associated elevated level of uncertainty, were likely reflected in recent downbeat readings on business sentiment in national and regional surveys and appeared to weigh heavily on business investment. In addition, the effects of substantial further declines in crude oil prices were being seen in the falling number of crude oil and natural gas rigs in operation through late April, an indicator of business spending on structures in the drilling and mining sector.Total industrial production fell precipitously in March, as the coronavirus outbreak led many factories to close late in the month. The decline in manufacturing output was led by a pullback in the production of motor vehicles and related parts. Output in the mining sector—which includes crude oil extraction—also decreased significantly in the wake of the recent declines in crude oil prices.Total real government purchases only edged up in the first quarter, led by a modest increase in federal purchases. State and local purchases were about flat, reflecting the effects of public school closures beginning in mid-March.Real exports declined sharply in the first quarter. However, imports declined at a much faster rate so that net exports made a sizable positive contribution to GDP growth. Much of the quarterly decline in trade volumes reflected a sharp drop in March due to weak demand globally and disruptions related to the coronavirus outbreak. The fall in exports was concentrated in services, particularly those parts of the sector held down by travel restrictions.Foreign economic activity fell sharply in the first quarter of the year amid widespread mandatory business shutdowns and strict social-distancing measures to contain the spread of the coronavirus outbreak. In China, where lockdowns were first implemented, real GDP contracted sharply in the first quarter, and Canada, Korea, and Singapore also saw substantial declines. Monthly indicators suggested that activity also plummeted in March and April in many other economies, particularly in the euro area and the United Kingdom, which both saw purchasing managers indexes fall to record-low levels. Many foreign governments announced large fiscal packages to address the sudden loss of income by firms and households. Many foreign central banks cut policy rates, initiated or enhanced credit facilities, relaxed capital requirements for financial institutions, and ramped up asset purchase programs to alleviate liquidity concerns in foreign capital markets. Foreign inflation fell steeply, reflecting large drops in energy prices related to plunging oil prices, while core inflation pressures generally remained muted.Staff Review of the Financial Situation In the middle part of March, financial markets experienced record declines in the prices of risky assets, widespread illiquidity, and elevated volatility, as uncertainty regarding the effects of the coronavirus outbreak on the global economy jumped. However, following the announcement and subsequent launching of a number of Federal Reserve emergency liquidity programs, the passage of the Cares Act (Coronavirus Aid, Relief, and Economic Security Act), and early signs of a decline in outbreak intensity in the United States and many major foreign economies, the extreme volatility and illiquidity subsided and prices of most risky assets increased notably. Over the intermeeting period, on net, the S&P 500 index rose, option-implied volatility fell, and Treasury yields declined, while corporate bond spreads widened somewhat. Financing conditions for businesses, households, and state and local governments were strained over the intermeeting period. However, the Federal Reserve's announcements and start-ups of emergency liquidity facilities appeared to improve conditions in many of these markets. These facilities were established with the approval of the Secretary of the Treasury under the authority of section 13(3) of the Federal Reserve Act and were designed to support the flow of credit to businesses, households, and state and local governments.Treasury markets experienced extreme volatility in mid-March, and market liquidity became substantially impaired as investors sold large volumes of medium- and long-term Treasury securities. Following a period of extraordinarily rapid purchases of Treasury securities and agency MBS by the Federal Reserve, Treasury market liquidity gradually improved through the remainder of the intermeeting period, and Treasury yields became less volatile. Although market depth remained exceptionally low and bid-ask spreads for off-the-run securities and long-term on-the-run securities remained elevated, bid-ask spreads for short-term on-the-run securities fell close to levels seen earlier in the year. Yields on nominal Treasury securities declined across the maturity spectrum, with the 10- and 30-year yields ending the period near all-time lows. A straight read of market quotes suggested that the expected federal funds rate would remain under 25 basis points through 2022. Measures of inflation compensation based on Treasury Inflation-Protected Securities (TIPS) ended the period higher, on net, but were still low by historical standards. Inflation compensation fell sharply in the first half of March but subsequently recovered, as overall financial conditions and TIPS liquidity improved. The market for agency MBS also experienced substantial stresses in mid-March, and agency MBS spreads to Treasury yields widened and were volatile. However, market conditions for agency MBS improved significantly in the second half of March, supported by the Federal Reserve's additional purchases of these securities.Stock price indexes were exceptionally volatile early in the intermeeting period, and one-month option-implied volatility on the S&P 500 index reached a record high. Equity market volatility moved down substantially over the remainder of the intermeeting period but remained elevated, and equity prices more than retraced their earlier declines to end the intermeeting period notably higher. Broad stock price index increases over the intermeeting period were led by the energy, consumer discretionary, basic materials, and health-care sectors. Broad equity price indexes remained, however, markedly below peaks registered earlier this year. Corporate bond spreads over comparable-maturity Treasury yields widened sharply in the beginning of the intermeeting period, and they subsequently retraced most of their increases to end up only somewhat higher on net. Corporate bond spreads at the end of the intermeeting period still stood significantly above their levels in January.In short-term funding markets, strains intensified in mid-March. Spreads of yields of term money market instruments over comparable-maturity overnight index swap rates increased sharply, and issuance of unsecured commercial paper, negotiable certificates of deposit, and short-term municipal debt declined substantially and shifted to very short maturities. Institutional prime money market funds (MMFs) experienced heavy redemptions and reportedly faced difficulties selling assets amid impaired secondary-market liquidity. The announcements and start-ups of several Federal Reserve emergency liquidity facilities in the second half of March helped stabilize short-term funding markets, and, by the end of the intermeeting period, spreads had narrowed across the board. Repo rates were elevated in mid-March but normalized following the very large inflows of funds into government MMFs, the expansion of the Federal Reserve's repo operations, and the announcement of the PDCF. The effective federal funds rate was at the top of the target range for a few days following the March FOMC meeting and, after declining in the second half of March, stayed at around 5 basis points for most of April.Early in the period, cascading shutdowns in many countries weighed heavily on risk sentiment abroad. Many foreign financial markets experienced severe illiquidity and substantial volatility, and foreign equity indexes posted large declines. However, extraordinary monetary and fiscal policy actions in the United States and abroad helped improve market sentiment, and most major foreign equity indexes subsequently rebounded notably. That said, compared with early this year, foreign equity indexes stayed sharply lower, and option-implied equity volatility abroad remained elevated. Advanced-economy sovereign yields were also volatile, but most sovereign yields ended the period somewhat lower. By the end of the intermeeting period, policy rates in most major advanced foreign economies (AFEs) were at or near their effective lower bounds. In mid-March, Emerging Market Bond Index (EMBI) spreads widened sharply, and capital outflows from EMEs reached record levels. As global sentiment improved somewhat, those capital outflows slowed and EMBI spreads partially retraced earlier increases.Strong demand for dollars amid flight to safety globally, together with disruptions in U.S. short-term funding markets, caused severe strains in funding markets for dollars abroad, especially early in the intermeeting period. The premiums paid by investors to borrow dollars using the foreign exchange swap market over the costs of directly borrowing dollars widened sharply as the end of the first quarter approached. FOMC actions, including several changes to the standing central bank liquidity swap lines and a temporary expansion in the number of central bank counterparties, as well as the announcement of the FIMA (Foreign and International Monetary Authorities) Repo Facility, notably improved conditions in the foreign exchange swap market. Nonetheless, conditions in this market remained strained.Over the period, the staff's broad dollar index increased, with the dollar appreciating modestly against AFE currencies and notably against EME currencies. Currencies of vulnerable commodity exporters, such as Mexico and Brazil, depreciated sharply. At the end of the intermeeting period, the broad dollar index remained significantly higher than at the beginning of the year.Financing conditions for nonfinancial businesses were strained in March, particularly for lower-rated firms and small businesses. Federal Reserve announcements of facilities to support the flow of credit to businesses, households, and state and local governments appeared to improve financing conditions in many markets, although conditions had yet to normalize. Issuance of speculative-grade bonds and leveraged loans was extremely low in March but resumed, at a slow pace, in April. Investment-grade issuance, while relatively slow in early March, was robust following the Federal Reserve's announcements in late March of the Primary Market Corporate Credit Facility and the Secondary Market Corporate Credit Facility. Conditions in the market for corporate bonds and loans improved further in response to the Federal Reserve's announcement in April that it would expand these facilities to include firms that had been recently downgraded to just below investment-grade status.Commercial and industrial (C&I) lending conditions were somewhat tight. Although C&I loans increased strongly, this increase was largely driven by firms drawing down existing lines of credit; they reportedly did so to shore up liquidity for precautionary motives and to meet funding needs. In the April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), banks reported having tightened their C&I lending standards and terms for firms of all sizes. Credit quality and the earnings outlook of nonfinancial corporations deteriorated substantially, and market analysts forecast a large volume of downgrades of nonfinancial corporate bonds, including a substantial volume from triple-B to speculative grade. Credit conditions for small businesses were tight. Concerns about the finances of state and local governments contributed to a marked deterioration in credit conditions in the municipal bond market in March. Although strains lessened amid Federal Reserve announcements on emergency lending facilities to support the flow of credit and liquidity to state and local governments—specifically, expansions to the MMLF and the CPFF and the establishment of the Municipal Liquidity Facility—spreads remained high and issuance subdued at the end of the intermeeting period.Financing conditions for commercial real estate (CRE) were strained. Non-agency commercial mortgage-backed securities (CMBS) issuance shut down, although secondary-market spreads narrowed following the extension of the Term Asset-Backed Securities Loan Facility (TALF) to include non-agency CMBS as eligible collateral. Meanwhile, agency CMBS issuance continued, supported by the Federal Reserve's purchases of these securities. Most April SLOOS respondents reported having tightened lending standards for CRE loans. CRE loans on banks' books increased in the second half of March, in part because banks were unable to securitize some nonresidential loans.Financing conditions in residential mortgage markets were tight for low-rated borrowers and other borrowers who rely on nonconforming mortgages. Many mortgage originators and warehouse lenders announced tighter underwriting standards on new originations. Despite a considerable widening of the spread between the primary mortgage rate and MBS yields, primary mortgage interest rates were low by historical standards, and available indicators suggested that refinancing activity remained elevated. The volume of mortgage rate locks for home-purchase loans dropped materially in early April, reflecting in part declines in homebuyer demand and disruptions in the home search and purchase process.Financing conditions in consumer credit markets tightened somewhat on net. Spreads on consumer asset-backed securities jumped in mid-March, and primary-market issuance came to a halt. However, in response to the announcement of the TALF and to diminished broader financial market uncertainty, spreads retraced most of their increase in the early part of the period, and primary-market issuance resumed. Though banks in the April SLOOS reported tightening standards on new consumer loans, respondents also experienced weaker demand for all consumer loan types. Auto loan interest rates dropped sharply in early April as manufacturers introduced attractive financing programs to boost sales.The staff assessed the stability of the financial system during the coronavirus outbreak. The banking sector, including the large banks, was resilient coming into this period. Banks were able to meet surging demand for draws on credit lines while also building loan loss reserves to absorb higher expected defaults. In other parts of the financial system, however, some notable vulnerabilities that had been identified in previous financial stability assessments exacerbated financial strains. In March, institutional prime MMFs and other institutions relying on unstable funding sources faced significant stress, a situation that put in jeopardy the orderly functioning of some financial markets. Federal Reserve actions to enhance the liquidity and functioning of key markets reduced these stresses notably. Open-end mutual funds that invest in corporate bonds and loans—institutions that typically face a timing mismatch between investors' ability to redeem shares and the funds' ability to sell assets—experienced heavy outflows and liquidity strains in mid-March. Redemptions later eased, however, amid the general improvement in financial markets. Business debt, which appeared to be high compared with fundamentals before the coronavirus outbreak, seemed poised to rise further as businesses borrowed to maintain their capacity to restart operations. Values of CRE faced the risk of large declines in response to the coronavirus outbreak, although updated readings were not yet available. The staff provided a preliminary reading on potential emerging risks to financial stability in the aftermath of the coronavirus outbreak. This reading highlighted possible vulnerabilities in mortgage servicers, insurance companies, and large, highly leveraged financial intermediaries.Staff Economic Outlook The projection for the U.S. economy prepared by the staff for the April FOMC meeting was downgraded notably from the March meeting forecast in response to information on the spread of the coronavirus and the measures undertaken to contain it both at home and abroad. U.S. real GDP was forecast to plummet and the unemployment rate to soar in the second quarter of this year. The substantial fiscal policy measures and monetary policy support that had been put in place were expected to help mitigate the deterioration in economic conditions and help boost the recovery.The staff noted that, importantly, the future performance of the economy would depend on the evolution of the coronavirus outbreak and the measures undertaken to contain it. Under the staff's baseline assumptions that the current restrictions on social interactions and business operations would ease gradually this year, real GDP was forecast to rise appreciably and the unemployment rate to decline considerably in the second half of the year, although a complete recovery was not expected by year-end. Inflation was projected to weaken this year, reflecting both the deterioration in resource utilization and sizable expected declines in consumer energy prices. Under the baseline assumptions, economic conditions were projected to continue to improve, and inflation to pick back up, over the next two years.The staff observed that uncertainty regarding the economic effects of the coronavirus outbreak was extremely elevated and that the historical behavior of the U.S. economy in response to past economic shocks provided limited guidance for making judgments about how the economy might evolve over coming quarters. In light of the significant uncertainty and downside risks associated with the evolution of the coronavirus outbreak, how much the economy would weaken, and how long it would take to recover, the staff judged that a more pessimistic projection was no less plausible than the baseline forecast. In this scenario, a second wave of the coronavirus outbreak, with another round of strict restrictions on social interactions and business operations, was assumed to begin around year-end, inducing a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year. Compared with the baseline, the disruption to economic activity was more severe and protracted in this scenario, with real GDP and inflation lower and the unemployment rate higher by the end of the medium-term projection.Participants' Views on Current Conditions and the Economic Outlook Participants noted that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health were inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices were holding down consumer price inflation. The disruptions to economic activity here and abroad had significantly affected financial conditions and had impaired the flow of credit to U.S. households and businesses.Participants judged that the effects of the coronavirus outbreak and the ongoing public health crisis would continue to weigh heavily on economic activity, employment, and inflation in the near term and would pose considerable risks to the economic outlook over the medium term. Participants assessed that the second quarter would likely see overall economic activity decline at an unprecedented rate. Participants relayed information from their Districts that the burdens of the present crisis would fall disproportionately on the most vulnerable and financially constrained households in the economy. Participants agreed that recently enacted fiscal programs were delivering valuable direct financial aid to households, businesses, and communities that would provide some relief during the economic shutdown. In addition, economic activity was being supported by actions taken by the Federal Reserve, including lending facilities created under the authority of section 13(3) of the Federal Reserve Act, some of which included capital allocated by the U.S. Treasury. These programs had helped maintain the flow of credit to households, businesses, and state and local governments, while supporting the smooth functioning of financial markets.Regarding the economic activity of households, participants noted that the pandemic and efforts to mitigate the spread of the disease were having severely adverse effects on aggregate household spending and consumer confidence. Participants reported that consumer spending had plummeted across all parts of the country and in most categories of spending, with especially sharp declines in expenditures for categories that had been most affected by social distancing, such as hotel, fuel, air travel, restaurant, theater, and other retail products and services. Participants noted that even after government-imposed social-distancing restrictions came to an end, consumer spending in these categories likely would not return quickly to more normal levels. Survey-based measures of consumer confidence also plunged, a development that participants and District contacts attributed to households' concerns regarding the risk of job loss or difficulty in meeting financial obligations. Participants noted that some households experiencing job losses may not immediately face lower total income because of the support from recently enacted fiscal programs. Even in such cases, however, participants observed that household spending would likely be held down by a decrease in confidence and an increase in precautionary saving.Participants noted that business activity and investment spending had also fallen dramatically since the previous meeting as a result of efforts to contain the coronavirus outbreak. Manufacturing output declined sharply in March and was expected by participants to drop even more rapidly in April. In all Districts, some businesses had been forced to close temporarily because of social distancing restrictions. Businesses that were able to remain open to some degree were also substantially affected by the pandemic, with many experiencing either substantial drops in new orders and sales or supply chain disruptions. There were widespread reports from District contacts of firms reducing their payrolls and curtailing plans for investment spending. Some industries were especially hard hit, including airlines, cruise ships, restaurants, and tourism. Participants reported that many firms were seeking loans, payment deferrals, or grants to help address critical financial obligations and that the Paycheck Protection Program (PPP) was providing valuable assistance to small businesses in this respect. Participants also noted the disproportionate burdens or particular challenges being faced by small businesses; these challenges included lower cash buffers, fewer financing options, and, more recently, tighter lending standards. Participants expressed concerns that a large number of small businesses may not be able to endure a shock that had long-lasting financial effects. Participants were further concerned that even after social-distancing requirements were eased, some business models may no longer be economically viable, which could occur, for example, if consumers voluntarily continued to avoid participating in particular forms of economic activity. In addition, participants expressed concern that the possibility of secondary outbreaks of the virus may cause businesses for some time to be reluctant to engage in new projects, rehire workers, or make new capital expenditures.Participants observed that conditions in the energy sector had become especially difficult. A sharp reduction in global demand for petroleum had led to unused supply that was overwhelming storage capacity, resulting in a plunge in oil prices. Some participants expressed concern that low energy prices, if they were to persist, had the potential to create a wave of bankruptcies in the energy sector. In addition, the agricultural sector was under severe stress due to falling prices for some farm commodities and pandemic-related disruptions, such as the closing of some food processing plants.With regard to the labor market, participants noted that incoming data confirmed that an extreme decline in employment was under way. Nationally, initial claims for unemployment insurance benefits had totaled more than 25 million from mid-March to the time of the meeting, and participants expected that the unemployment rate would soon reach the highest levels of the post–World War II period. District contacts reported that a significant portion of workers had been able to switch to working remotely. Although many employers were trying to keep workers on their payrolls, over time, as conditions persisted, there had begun to be widespread furloughs and layoffs. Participants were concerned that temporary layoffs could become permanent, and that workers who lose employment could face a loss of job-specific skills or may become discouraged and exit the labor force. Participants were additionally concerned that employees who were on low incomes would be the most severely affected by job cuts because they were employed in the industries most affected by the response to the outbreak or because their jobs were not amenable to being carried out remotely.With regard to inflation, participants noted that it had been running below the Committee's 2 percent longer-run objective before the coronavirus outbreak. While the pandemic had created some supply constraints, which had generated upward pressure on the prices of some goods, the pandemic had also reduced demand, which had exerted downward pressure on prices. The overall effect of the outbreak on prices was seen as disinflationary. In addition, a stronger dollar and lower oil prices were factors likely to put downward pressure on inflation, and market-based measures of inflation compensation remained very low. Participants observed that the return of inflation to the Committee's 2 percent longer-run objective would likely be further delayed but that the accommodative stance of monetary policy would be helpful in achieving the 2 percent inflation objective over the longer run.Participants noted that recently enacted fiscal programs were crucial for limiting the severity of the economic downturn. In particular, the Cares Act and other legislation, which represented more than $2 trillion in federal spending in total, had provided direct help to households, businesses, and communities. For example, the PPP was providing a financial lifeline to small businesses, the expansion of unemployment benefits was helping restore lost income for laid-off workers, and the Treasury had provided a necessary financial backstop to many Federal Reserve lending facilities. Participants acknowledged that even greater fiscal support may be necessary if the economic downturn persists.Participants commented that, in addition to weighing heavily on economic activity in the near term, the economic effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term. Participants discussed several alternative scenarios with regard to the behavior of economic activity in the medium term that all seemed about equally likely. These scenarios differed in the assumed length of the pandemic and the consequent economic disruptions. On the one hand, a number of participants judged that there was a substantial likelihood of additional waves of outbreak in the near or medium term. In such scenarios, it was believed likely that there would be further economic disruptions, including additional periods of mandatory social distancing, greater supply chain dislocations, and a substantial number of business closures and loss of income; in total, such developments could lead to a protracted period of severely reduced economic activity. On the other hand, economic activity could recover more quickly if the pandemic subsided enough for households and businesses to become sufficiently confident to relax or modify social-distancing behaviors over the next several months. Beyond these considerations, participants noted the risk that foreign economies, particularly EMEs, could come under extreme pressure as a result of the pandemic and that this strain could spill over to and hamper U.S. economic activity. 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 more normal conditions. In addition, participants agreed that recent actions taken by the Federal Reserve were essential in helping reduce downside risks to the economic outlook.Participants also noted several risks to long-term economic performance that were posed by the pandemic. One of these risks was that workers who lose employment as a result of the pandemic may experience a loss of skills, lose access to adequate childcare or eldercare, or become discouraged and exit the labor force. The longer-term behavior of firms could be affected as well—for instance, if necessary but costly transmission-mitigation strategies lowered firms' productivity; if business investment shifted down permanently; if many firms need to adjust their business models in the aftermath of the pandemic; or if business closures, particularly those of small firms, became widespread. A few participants noted that higher levels of government indebtedness, which would be exacerbated by fiscal expenditures that were necessary to combat the economic effects of the pandemic, could put downward pressure on growth in aggregate potential output.Regarding developments in financial markets, participants agreed that ongoing actions by the Federal Reserve had been instrumental in easing strains in some essential financial markets and supporting the flow of credit. These actions included large-scale purchases of Treasury securities and agency MBS, measures to reduce strains in global U.S. dollar funding markets, and the launch of programs to support the flow of credit in the economy for households, businesses of all sizes, and state and local governments. Banks had entered the crisis well capitalized and had been able to provide necessary credit to businesses and households.A number of participants commented on potential risks to financial stability. Participants were concerned that banks could come under greater stress, particularly if adverse scenarios for the spread of the pandemic and economic activity were realized, and so this sector should be monitored carefully. Participants saw risks to banks and some other financial institutions as exacerbated by high levels of indebtedness among nonfinancial corporations that prevailed before the pandemic; this indebtedness increased these firms' risk of insolvency. The upcoming financial stress tests for banks were seen as important for measuring the ability of large banks to withstand future downside scenarios. A number of participants emphasized that regulators should encourage banks to prepare for possible downside scenarios by further limiting payouts to shareholders, thereby preserving loss-absorbing capital. Indeed, historical loss models might understate losses in this context. A few participants stressed that the activities of some nonbank financial institutions presented vulnerabilities to the financial system that could worsen in the event of a protracted economic downturn and that these institutions and activities should be monitored closely.In their consideration of monetary policy at this meeting, participants noted 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. In light of their assessment that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term, all participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to 1/4 percent. Keeping the target range at the effective lower bound, after quickly reducing it by 150 basis points in March, would continue to provide support to the economy and promote the Committee's maximum employment and price stability goals. Participants also judged that it would be appropriate to maintain the target range for the federal funds rate at its present level 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.Participants also assessed that it was appropriate for the Federal Reserve to continue to purchase Treasury securities and agency residential-mortgage-backed securities (RMBS) and CMBS in the amounts needed to support smooth market functioning. These open market purchases would continue to support the flow of credit to households and businesses and thereby foster the effective transmission of monetary policy to broader financial conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations. Participants noted that it was important to continue to monitor market conditions closely and that the Committee was prepared to adjust its plans as appropriate to support smooth functioning in the markets for these securities.Participants also commented that the multiple lending facilities established by the Federal Reserve under the authority of section 13(3) of the Federal Reserve Act and, in some cases, involving capital allocated by the Treasury were supporting financial market functioning and the flow of credit to households, businesses of all sizes, and state and local governments. In this way, these emergency lending facilities were intended to help support the economy until pandemic-related credit market disruptions had abated. Several participants commented further that it would be important for the Federal Reserve to remain ready to adjust these emergency lending facilities as appropriate based on its monitoring of financial market functioning and credit conditions.While participants agreed that the current stance of monetary policy remained appropriate, they noted that the Committee could, at upcoming meetings, further clarify its intentions with respect to its future monetary policy decisions. Some participants commented that the Committee could make its forward guidance for the path for the federal funds rate more explicit. For example, the Committee could adopt outcome-based forward guidance that would specify macroeconomic outcomes—such as a certain level of the unemployment rate or of the inflation rate—that must be achieved before the Committee would consider raising the target range for the federal funds rate. The Committee could also consider date-based forward guidance that would indicate that the target range could be raised only after a specified amount of time had elapsed. These participants noted that such explicit forms of forward guidance could help ensure that the public's expectations regarding the future conduct of monetary policy continued to reflect the Committee's intentions. Several participants observed that the completion, most likely later this year, of the monetary policy framework review, together with the announcement of the conclusions arising from the review, would help further clarify the Committee's intentions with respect to its future monetary policy actions. Several participants also remarked that the Committee may need to provide further clarity regarding its intentions for purchases of Treasury securities and agency MBS; these participants noted that, without further communication on this matter, uncertainty about the evolution of the Federal Reserve's asset purchases could increase over time. Several participants remarked that a program of ongoing Treasury securities purchases could be used in the future to keep longer-term yields low. A few participants also noted that the balance sheet could be used to reinforce the Committee's forward guidance regarding the path of the federal funds rate through Federal Reserve purchases of Treasury securities on a scale necessary to keep Treasury yields at short- to medium-term maturities capped at specified levels for a period of time.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health were inducing sharp declines in economic activity and a surge in job losses. Consumer price inflation was being held down by weaker demand and significantly lower oil prices. The disruptions to global economic activity had significantly affected financial conditions and impaired the flow of credit to U.S. households and businesses. 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.Members further concurred that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term, and posed considerable downside risks to the economic outlook over the medium term. In light of these developments, members decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. Members noted that they expected to maintain this target range 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.Members agreed 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 would use the Committee's tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, members noted that they would assess realized and expected economic conditions relative to the Committee's maximum employment objective and its symmetric 2 percent inflation objective. 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.To support the flow of credit to households and businesses, members agreed that it was appropriate for the Federal Reserve to continue to purchase Treasury securities and agency RMBS and CMBS in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations. Members agreed that they would closely monitor market conditions and be prepared to adjust their 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, for release at 2:00 p.m.:"Effective April 30, 2020, 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 coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 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.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.To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will 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, 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 leave the interest rates on required and excess reserve balances at 0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit rate at the existing level of 0.25 percent, effective April 30, 2020.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, June 9–10, 2020. The meeting adjourned at 10:10 a.m. on April 29, 2020.Notation Votes To address intensifying strains in global financial markets early in the intermeeting period, the Committee unanimously approved the following measures to help maintain the flow of credit to U.S. households and businesses:By notation vote completed on April 7, 2020, the Committee unanimously approved the minutes of the Committee meeting held on March 15, 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 Tuesday's session only. Return to text3. Committee organizational documents are available at https://www.federalreserve.gov/monetarypolicy/rules_authorizations.htm. 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 04 29Consumer Resources June 9-10, 2020A joint meeting of the Federal Open Market Committee and the Board of Governors was held by videoconference on Tuesday, June 9, 2020, at 10:00 a.m. and continued on Wednesday, June 10, 2020, at 9:00 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, Charles L. Evans, and Michael Strine, 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, Trevor A. Reeve, 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 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 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 GovernorsWilliam F. Bassett, Antulio N. Bomfim, Wendy E. Dunn, Ellen E. Meade, Chiara Scotti, and Ivan Vidangos, Special Advisers to the Board, Office of Board Members, Board of GovernorsLinda Robertson, Assistant to the Board, Office of Board Members, Board of GovernorsBrian M. Doyle,3 Senior Associate Director, Division of International Finance, Board of Governors; Eric M. Engen, Senior Associate Director, Division of Research and Statistics, Board of GovernorsEdward Nelson4 and Robert J. Tetlow, Senior Advisers, Division of Monetary Affairs, Board of Governors; Jeremy B. Rudd, Senior Adviser, Division of Research and Statistics, Board of GovernorsSally Davies, Associate Director, Division of International Finance, Board of Governors; David López-Salido, Associate Director, Division of Monetary Affairs, Board of GovernorsBurcu Duygan-Bump, Andrew Figura, Shane M. Sherlund, 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 Governors; Paul R. Wood,4 Deputy Associate Director, Division of International Finance, Board of GovernorsBrian J. Bonis, Etienne Gagnon, and Zeynep Senyuz, Assistant Directors, Division of Monetary Affairs, Board of GovernorsMatthias Paustian,4 Assistant Director and Chief, Division of Research and Statistics, Board of GovernorsPenelope A. Beattie,5 Section Chief, Office of the Secretary, Board of Governors; Dana L. Burnett, Section Chief, Division of Monetary Affairs, Board of Governors; Dario Caldara,6 Section Chief, Division of International Finance, Board of GovernorsMark A. Carlson, Senior Economic Project Manager, Division of Monetary Affairs, Board of Governors; Canlin Li,4 Senior Economic Project Manager, Division of International Finance, Board of GovernorsDavid H. Small, Project Manager, Division of Monetary Affairs, Board of GovernorsHess T. Chung,4 Group Manager, Division of Research and Statistics, Board of GovernorsMichele Cavallo, Bernd Schlusche,4 and Mary Tian, Principal Economists, Division of Monetary Affairs, Board of Governors; Maria Otoo, Principal Economist, Division of Research and Statistics, Board of GovernorsSriya Anbil,4 Erin E. Ferris, and Fabian Winkler, Senior Economists, Division of Monetary Affairs, Board of Governors; David S. Miller,4 Senior Economist, Division of Research and Statistics, Board of Governors; Gaston Navarro, Senior Economist, Division of International Finance, Board of GovernorsRandall A. Williams, Senior Information Manager, Division of Monetary Affairs, Board of GovernorsJames Hebden4 and James M. Trevino,4 Senior Technology Analysts, Division of Monetary Affairs, Board of GovernorsAndre Anderson, First Vice President, Federal Reserve Bank of AtlantaDavid Altig, Joseph W. Gruber, Anna Paulson, Daleep Singh, and Christopher J. Waller, Executive Vice Presidents, Federal Reserve Banks of Atlanta, Kansas City, Chicago, New York, and St. Louis, respectivelyEdward S. Knotek II, Paolo A. Pesenti, Julie Ann Remache,2 Samuel Schulhofer-Wohl,2 Robert G. Valletta, and Nathaniel Wuerffel,2 Senior Vice Presidents, Federal Reserve Banks of Cleveland, New York, New York, Chicago, San Francisco, and New York, respectivelyRoc Armenter, Matthew D. Raskin,2 and Patricia Zobel, Vice Presidents, Federal Reserve Banks of Philadelphia, New York, and New York, respectivelyRobert Lerman,2 Assistant Vice President, Federal Reserve Bank of New YorkDaniel Cooper and John A. Weinberg, Senior Economists and Policy Advisors, Federal Reserve Banks of Boston and Richmond, respectivelyThe Chair opened the meeting with an acknowledgment of the extraordinary and deeply troubling events of the last two weeks. Injustice, prejudice, and the callous disregard for life had led to social unrest and a sense of despair. The Chair noted that it was incumbent upon the leaders of the Federal Reserve System to continue to communicate with force and clarity about the Federal Reserve's core values, and to reaffirm its unflinching commitment to those values in pursuing the Federal Reserve's mandated goals. In that spirit, the Chair noted that he intended to offer the following remarks at the end of the postmeeting press conference. All participants supported the statement affirming the Federal Reserve's core values and its commitment to do everything it can to foster racial equality as well as diversity and inclusion both within the Federal Reserve System and in society more broadly.I want to acknowledge the tragic events that have again put a spotlight on the pain of racial injustice in this country. The Federal Reserve serves the entire nation. We operate in, and are part of, many of the communities across the country where Americans are grappling with and expressing themselves on issues of racial equality.I speak for my colleagues throughout the Federal Reserve System when I say that there is no place at the Federal Reserve for racism, and there should be no place for it in our society. Everyone deserves the opportunity to participate fully in our society and in our economy.These foundational principles guide us in all we do, from monetary policy to our focus on diversity and inclusion in our workplace, and to our work regulating and supervising banks to ensure fair access to credit around the country. We will take this opportunity to renew our steadfast commitment to these principles, making sure that we are playing our part.We understand that the work of the Federal Reserve touches communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.Discussion of Forward Guidance, Asset Purchases, and Yield Curve Caps or Targets Participants discussed tools for conducting monetary policy when the federal funds rate is at its effective lower bound (ELB). The discussion addressed two topics: (1) the roles of forward guidance and large-scale asset purchase programs in supporting the attainment of the Committee's maximum-employment and price-stability goals and (2) in light of the foreign and historical experience with approaches that cap or target interest rates along the yield curve, whether such approaches could be used to support forward guidance and complement asset purchase programs. The staff briefing on the first topic focused on outcome-based forward guidance for the federal funds rate—which ties changes in the target range for the federal funds rate to the achievement of specified macroeconomic outcomes, such as reaching a given level of the unemployment rate or inflation—and asset purchase programs of the kind used during and following the previous recession. The staff presented results from model simulations that suggested that forward guidance and large-scale asset purchases can help support the labor market recovery and the return of inflation to the Committee's symmetric 2 percent inflation goal. The simulations suggested that the Committee would have to maintain highly accommodative financial conditions for many years to quicken meaningfully the recovery from the current severe downturn. The briefing addressed factors that might alter the potency of forward guidance and asset purchase programs, along with a number of considerations for the design of these actions. The staff cautioned that businesses and households might not be as forward looking as assumed in the model simulations, which could reduce the effectiveness of policies that are predicated on influencing expectations about the path of policy several years into the future. Alternatively, prompt and forceful policy actions by the Committee might help focus the public's expectations around better outcomes or reduce perceived risks of worst-case scenarios, which could generate more immediate macroeconomic benefits than those featured in the staff analysis.The second staff briefing reviewed the yield caps or targets (YCT) policies that the Federal Reserve followed during and after World War II and that the Bank of Japan and the Reserve Bank of Australia are currently employing. These three experiences illustrated different types of YCT policies: During World War II, the Federal Reserve capped yields across the curve to keep Treasury borrowing costs low and stable; since 2016, the Bank of Japan has targeted the 10-year yield to continue to provide accommodation while limiting the potential for an excessive flattening of the yield curve; and, since March 2020, the Reserve Bank of Australia has targeted the three-year yield, a target that is intended to reinforce the bank's forward guidance for its policy rate and to influence funding rates across much of the Australian economy. The staff noted that these three experiences suggested that credible YCT policies can control government bond yields, pass through to private rates, and, in the absence of exit considerations, may not require large central bank purchases of government debt. But the staff also highlighted the potential for YCT policies to require the central bank to purchase very sizable amounts of government debt under certain circumstances—a potential that was realized in the U.S. experience in the 1940s—and the possibility that, under YCT policies, monetary policy goals might come in conflict with public debt management goals, which could pose risks to the independence of the central bank.In their discussion of forward guidance and large-scale asset purchases, participants agreed that the Committee has had extensive experience with these tools, that they were effective in the wake of the previous recession, that they have become key parts of the monetary policy toolkit, and that, as a result, they have important roles to play in supporting the attainment of the Committee's maximum-employment and price-stability goals. Various participants noted that the economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases. Participants generally indicated support for outcome-based forward guidance. A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the Committee's longer-run inflation goal but where inflation fluctuations would be centered on 2 percent over time. They saw this form of forward guidance as helping reinforce the credibility of the Committee's symmetric 2 percent inflation objective and potentially preventing a premature withdrawal of monetary policy accommodation. A couple of participants signaled a preference for forward guidance tied to the unemployment rate, noting that it would be more credible to focus on labor market outcomes that have been achieved in the recent past or that—given how high the unemployment rate currently is—such guidance would clearly signal a high degree of accommodation for an extended period. A few others suggested that calendar-based guidance—which specifies a date beyond which accommodation could start to be reduced—might be at least as effective as outcome-based guidance. They noted that calendar-based guidance had been very effective when the Committee used it in 2011 and 2012 or that it would be very challenging to provide credible outcome-based guidance in light of the substantial uncertainty surrounding the current economic outlook. Regardless of the specific form of forward guidance, a couple of participants expressed the concern that policies that effectively committed the Committee to maintaining very low interest rates for a long time could ultimately pose significant risks to financial stability.Participants agreed that asset purchase programs can promote accommodative financial conditions by putting downward pressure on term premiums and longer-term yields. Several participants remarked that declines in the neutral rate of interest and in term premiums over the past decade and prevailing low levels of longer-term yields would likely act as constraints on the effectiveness of asset purchases in the current environment and noted that these constraints were not as acute when the Committee implemented such programs in the wake of the Global Financial Crisis. These participants noted, however, that large-scale asset purchases could still be beneficial under current circumstances by offsetting potential upward pressures on longer-term yields or by helping reinforce the Committee's commitment to maintaining highly accommodative financial conditions. A few participants questioned the desirability of large-scale asset purchases following the current purchases to support market functioning, noting that they likely would lead to a further considerable expansion of the Federal Reserve's balance sheet or have potentially adverse implications for financial stability.In their discussion of the foreign and historical experience with YCT policies and the potential role for such policies in the United States, nearly all participants indicated that they had many questions regarding the costs and benefits of such an approach. Among the three episodes discussed in the staff presentation, participants generally saw the Australian experience as most relevant for current circumstances in the United States. Nonetheless, many participants remarked that, as long as the Committee's forward guidance remained credible on its own, it was not clear that there would be a need for the Committee to reinforce its forward guidance with the adoption of a YCT policy. In addition, participants raised a number of concerns related to the implementation of YCT policies, including how to maintain control of the size and composition of the Federal Reserve's balance sheet, particularly as the time to exit from such policies nears; how to combine YCT policies—which at least in the Australian case incorporate aspects of date-based forward guidance—with the types of outcome-based forward guidance that many participants favored; how to mitigate the risks that YCT policies pose to central bank independence; and how to assess the effects of these policies on financial market functioning and the size and composition of private-sector balance sheets. A number of participants commented on additional challenges associated with YCT policies focused on the longer portion of the yield curve, including how these policies might interact with large-scale asset purchase programs and the extent of additional accommodation they would provide in the current environment of very low interest rates. Some of these participants also noted that longer-term yields are importantly influenced by factors such as longer-run inflation expectations and the longer-run neutral real interest rate and that changes in these factors or difficulties in estimating them could result in the central bank inadvertently setting yield caps or targets at inappropriate levels. A couple of participants remarked that an appropriately designed YCT policy that focused on the short-to-medium part of the yield curve could serve as a powerful commitment device for the Committee. These participants noted that, even if market participants currently expect the federal funds rate to remain at its ELB through the medium term, the introduction of an effective YCT policy could help prevent those expectations from changing prematurely—as happened during the previous recovery—or that the size of a large-scale asset purchase program, which also poses risks to central bank independence, could be reduced by an effective YCT policy. All participants agreed that it would be useful for the staff to conduct further analysis of the design and implementation of YCT policies as well as of their likely economic and financial effects.A number of participants emphasized that, when assessing the potential roles that different monetary policy tools might play to support the attainment of the Committee's goals, it was important to think about how various policy tools could be used in coordination as part of the Committee's overall strategy to achieve its dual-mandate objectives. In addition, various participants noted that clear communications with the public are central to the efficacy of all policy tools and that, therefore, the Committee should complete its monetary policy framework review in the near term, including revising the Statement on Longer-Run Goals and Monetary Policy Strategy. Such a revised statement would communicate to the public how the Committee views its policy goals and provide additional context to the Committee's policy actions.Developments in Financial Markets and Open Market Operations The System Open Market Account (SOMA) manager first discussed developments in financial markets over the intermeeting period. Risk asset prices were buoyed by optimism about the potential for increased economic activity associated with reopenings as parts of the United States and other countries relaxed lockdown restrictions. That optimism was reinforced by high-frequency data suggesting a pickup in economic activity. Market participants also pointed to the suite of U.S. and global policy measures taken since mid-March as laying a foundation for the improvement in risk sentiment. Against this backdrop, staff analysis suggested that equity prices had been supported by expectations for a strong rebound in earnings next year, low risk-free rates and positive risk sentiment. Despite this improvement in risk sentiment, market participants expected weak overall growth in 2020, and elevated uncertainties in the outlook remained. The manager noted that prospects for adverse developments regarding the coronavirus (COVID-19) and the potential for financial strains to amplify recessionary dynamics, and geopolitical developments, including renewed U.S.–China tensions, presented near term risks to financial markets. Market participants were also attentive to the recent steepening in the Treasury yield curve and noted a range of uncertainties in the outlook for longer-term rates.Regarding expectations for monetary policy, respondents to the Open Market Trading Desk's surveys suggested that most market participants did not anticipate policy changes at the June meeting. The target range for the federal funds rate was expected to remain at the ELB for at least the next couple of years, although many survey respondents attached some probability to the target range increasing in 2022. Although the rates implied by federal funds futures contracts settling next year had fallen to slightly negative levels in May, survey respondents attached very little probability to the possibility of negative policy rates.The manager turned to a discussion of Federal Reserve operations. Credit facilities, some of which became operational over the period, generally experienced modest activity in light of broad improvements in credit market conditions. New usage across many funding operations and facilities had declined over the intermeeting period as conditions in funding markets improved. The manager noted that a significant proportion of amounts outstanding under U.S. dollar liquidity swaps and repurchase agreements (repo) reflected term transactions initiated during the period of funding market strains. In light of the improvement in funding market conditions, the manager noted that it might be appropriate to make a modest adjustment to the minimum bid rates on repo operations in the forthcoming calendar, which would effectively position these operations in a backstop role. These adjustments were not expected to have any significant effects in short-term funding markets.Finally, the manager discussed the near-term plans for purchases of Treasury securities and agency mortgage-backed securities (MBS). Overall, functioning in the markets for these securities had improved substantially. In light of these improvements, the Desk had gradually reduced the pace of purchases over the intermeeting period, to their current levels of $4 billion per day in Treasury securities and $4.5 billion per day in agency MBS. These purchase amounts were significantly lower than the peak pace in mid-March and roughly corresponded to monthly increases in SOMA holdings of approximately $80 billion in Treasury securities and $40 billion in agency MBS. Continuing to increase holdings at this pace would likely help sustain the improvements in market functioning, and seemed to be roughly in line with market expectations for Treasury purchases, and toward the lower end of expectations for agency MBS purchases, net of reinvestments. In addition, principal payments from agency debt and agency MBS held in the SOMA portfolio could continue to be reinvested in agency MBS. Weekly operations in agency commercial mortgage-backed securities (CMBS) would also be conducted. The Desk was prepared to increase the size or adjust the composition of Treasury, agency MBS and agency CMBS purchases as needed to sustain smooth market functioning in the markets for these securities.By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.Staff Review of the Economic Situation The coronavirus outbreak and the measures undertaken to contain its spread were severely disrupting economic activity in the United States and abroad. The available information for the June 9–10 meeting suggested that U.S. real gross domestic product (GDP) would likely post a historically large decline in the second quarter. Labor market conditions improved in May, but these improvements were modest relative to the substantial deterioration seen over the previous two months. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), slowed notably through April, reflecting the effects of both weak aggregate demand and low energy prices.Total nonfarm payroll employment expanded strongly in May, though by much less than the historic job losses recorded in April. The unemployment rate moved down to 13.3 percent in May after soaring to 14.7 percent in April. As was highlighted by the Bureau of Labor Statistics, these figures likely understated the extent of unemployment; accounting for the unusually large number of workers who reported themselves as employed but absent from their jobs would have raised the unemployment rate by 5 percentage points in April and 3 percentage points in May. Both the labor force participation rate and the employment-to-population ratio increased in May. Initial claims for unemployment insurance benefits had declined through the last week of May from their peak in late March, but they still were at a historically elevated level. Average hourly earnings for all employees declined in May after rising sharply in April, but these fluctuations largely reflected the substantial changes in the level and composition of employment, which disproportionately affected lower-wage workers. The employment cost index for total labor compensation in the private sector increased 2.8 percent over the 12 months ending in March—a period mostly predating the onset of the pandemic—and was the same as its year-earlier pace.Total PCE price inflation was only 0.5 percent over the 12 months ending in April, reflecting both weak aggregate demand in recent months and a considerable drop in consumer energy prices. Prices fell in March and April in many categories that were affected the most by social-distancing measures, such as the prices for air travel and hotel accommodations. Core PCE price inflation, which excludes changes in consumer food and energy prices, was 1.0 percent over the 12 months ending in April. In contrast, the trimmed mean measure of 12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas was 1.9 percent in April. The consumer price index (CPI) inched up 0.1 percent over the 12 months ending in May, while core CPI inflation was 1.2 percent over the same period. Recent readings on survey-based measures of longer-run inflation expectations were little changed on balance. The University of Michigan Surveys of Consumers measure for the next 5 to 10 years edged up in May, while the 3-year-ahead measure from the Federal Reserve Bank of New York's Survey of Consumer Expectations was unchanged. The 10-year measure for PCE price inflation from the Survey of Professional Forecasters ticked down in the second quarter. All of these measures of longer-run inflation expectations continued to be near their recent ranges.Real PCE slumped in April, with declines widespread across most spending categories. In May, however, light motor vehicle sales and some other high-frequency indicators of consumer spending turned up, but the levels of these indicators were mostly still below their levels early in the year. Real disposable personal income increased significantly in April, as a marked decline in wage and salary income was more than offset by a substantial boost from government transfer payments due to recent fiscal policy support; as a result, the personal saving rate soared. The consumer sentiment measures from both the Michigan survey and the Conference Board survey crept up in May but remained below their levels early in the year.Real residential investment appeared to be weakening significantly in the second quarter. Starts and building permit issuance for single-family homes, along with starts of multifamily units, dropped sharply in April. Sales of existing homes contracted markedly in April, although new home sales edged up.Real business fixed investment continued to tumble in the second quarter. Nominal new orders and shipments of nondefense capital goods excluding aircraft decreased considerably in April. Nominal business spending for nonresidential structures outside of the drilling and mining sector also fell in April. In addition, the effects of low crude oil prices were evident in further declines in the number of crude oil and natural gas rigs in operation through early June, an indicator of business spending on structures in the drilling and mining sector.Total industrial production plunged in April, as many factories slowed or suspended operation in response to the coronavirus pandemic. The decline in manufacturing production was widespread across all major industries and was led by a collapse in the output of motor vehicles and related parts. Output in the mining sector—which includes crude oil extraction—also decreased, reflecting the effects of low crude oil prices.Total real government purchases appeared to be rising moderately in the second quarter. Federal defense spending continued to increase in April, and nondefense purchases were likely to be boosted in the second quarter by recent fiscal policy measures related to the coronavirus. In contrast, state and local purchases looked to be declining, as the payrolls of these governments shrank in April and May, and nominal state and local construction expenditures decreased in April.The nominal U.S. international trade deficit widened in both March and April, as exports of goods and services plunged more than imports. The fall in goods exports was broad based, with particularly sharp declines in automotive products, industrial supplies, and capital goods. Goods imports also contracted significantly in most categories through April, and a near halt of international travel drove a steep decline in exports and imports of services.Foreign economic activity contracted in the first quarter, even though most countries abroad introduced strict social-distancing measures to contain the spread of the coronavirus only toward the end of the quarter. In China, where restrictions were largely lifted by the end of the first quarter, data pointed to a relatively quick rebound in economic activity in the second quarter. Outside of China, indicators suggested that foreign economic activity plummeted further in the second quarter, notwithstanding some signs of improvement in May as restrictions started to ease. Inflation rates fell sharply across most foreign economies in April and May. The low level of oil prices relative to a year ago contributed to 12-month inflation rates close to or below zero in many advanced foreign economies (AFEs).Staff Review of the Financial Situation Over the intermeeting period, risk sentiment improved, on net, as optimism over reopening the economy, potential coronavirus treatments, the unexpectedly positive May employment situation report, and other indicators that suggest that economic activity may be rebounding more than offset concerns arising from otherwise dire economic data releases, warnings from health experts that openings may have been premature, and renewed tensions between the United States and China. Equity prices rose, and corporate bond spreads narrowed notably. The Treasury yield curve steepened, and the market-implied expected path of the federal funds rate declined somewhat. Liquidity conditions continued to improve in general, but some stress was still evident in several markets. Financing conditions were still somewhat strained for lower-rated borrowers and small businesses even as announcements and implementation of Federal Reserve facilities during the intermeeting period were supportive of credit flows. The credit quality of businesses and municipal debt weakened.The expected path of the federal funds rate for the next few years, based on a straight read of overnight index swap quotes, declined a bit and remained close to the ELB through late 2023. Market-implied forward rates referring to 2021 and 2022 turned slightly negative for a few days beginning on May 7, though market commentary suggested that this development did not reflect investors expecting the FOMC to lower the federal funds rate target range below zero. This view was supported by Federal Reserve communications that negative interest rates did not appear to be an attractive policy tool.The Treasury yield curve steepened over the intermeeting period, with 2-year yields little changed while 10- and 30-year yields rose. Longer-term yields were likely boosted by expectations of heavy upcoming Treasury security issuance as well as some unwinding of safe-haven demands in connection with improved investor sentiment. The Treasury's first 20-year bond offering since 1986 was met with solid demand. Changes in inflation compensation based on Treasury Inflation-Protected Securities yields were mixed; 5-year inflation compensation rose amid the recent partial rebound in crude oil prices, while the 5-to-10-year measure edged down. At the end of the intermeeting period, both measures stood roughly halfway between their mid-March lows and typical levels seen in recent years.Broad stock price indexes moved higher. One-month implied volatility on the S&P 500 index declined somewhat but still stood at the 85th percentile of its distribution since 1990. Spreads on investment- and speculative-grade corporate bonds over comparable-maturity Treasury yields narrowed considerably but remained at levels similar to those in other periods of notable economic or bond market stress, though well below financial crisis levels.Over the intermeeting period, financial market functioning appeared to improve in general, although progress was uneven. Liquidity measures improved in the Treasury market, but off-the-run Treasury securities of all tenors and longer-maturity on-the-run securities remained less liquid than before the onset of the pandemic. Agency MBS market functioning had largely recovered, except for some less liquid parts of the market. Corporate bond market liquidity improved considerably but remained somewhat strained, particularly for speculative-grade bonds. Liquidity in the municipal bond markets was still below pre-pandemic levels.Conditions in unsecured short-term funding markets continued to improve over the intermeeting period, and spreads on most types of commercial paper and negotiable certificates of deposit narrowed to levels that approached pre-pandemic ranges. Amid better market conditions, take-up in the emergency liquidity facilities declined substantially. Heavy demand for Treasury bills from money market funds held down rates despite an unprecedented pace of issuance. The effective federal funds rate was 5 basis points almost every day over the intermeeting period, and the Secured Overnight Financing Rate averaged 4 basis points. Total outstanding Federal Reserve repos averaged about $170 billion. Amid improving market functioning, Federal Reserve purchases of Treasury securities and agency MBS were reduced from around $10 billion and $8 billion per day, respectively, to $4 billion and $4.5 billion per day, respectively, over the intermeeting period.Risk sentiment in foreign financial markets improved over the intermeeting period. Further monetary policy and fiscal policy support in foreign countries, the easing of coronavirus-related restrictions, and a stronger-than-expected U.S. May employment report outweighed concerns about otherwise weak global economic data and the resurgence of U.S.–China tensions. Liquidity in global dollar funding markets continued to improve, helped in part by the Federal Reserve's liquidity programs, and prices of foreign risky assets increased. In the AFEs, option-implied volatility measures declined and long-term sovereign bond yields rose moderately, while fiscal stimulus in Japan and Europe boosted prices in their respective equity markets. Euro-area peripheral bond spreads narrowed after the European Commission proposed that the European Union be given the authority to borrow €750 billion to assist the recovery and the European Central Bank (ECB) increased the size of its Pandemic Emergency Purchase Programme. In emerging markets, the rise in oil prices since late April and overall improvements in investor sentiment boosted asset prices, even as the coronavirus outbreak worsened in some countries. Outflows from emerging market funds slowed and then turned into small inflows later in the period.The improving risk sentiment also supported several foreign currencies, and the staff's broad dollar index fell. The euro appreciated notably over the period, lifted in part by the European fiscal and monetary policy communications. The recent rebound in oil prices contributed to a strong appreciation of the Canadian dollar, the Brazilian real, and the Mexican peso.Financing conditions for nonfinancial firms eased somewhat over the intermeeting period, though they remained moderately strained for lower-rated borrowers. Investment-grade corporate bond issuance soared to record levels in April and remained robust in May, as issuers took advantage of more favorable market conditions following Federal Reserve announcements of two facilities to support corporate credit markets. Regarding these facilities, the Secondary Market Corporate Credit Facility began in mid-May to purchase exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. Speculative-grade corporate bond issuance picked up considerably toward the end of April from very low levels, though it slowed somewhat in May. Commercial and industrial loans on banks' books surged again in April, largely driven by lending through the Paycheck Protection Program (PPP), especially at smaller banks. Credit-line drawdowns continued in April and May, though drawdowns by large firms slowed considerably from record levels in March.The credit quality of nonfinancial corporations continued to deteriorate sharply during the intermeeting period. The volume of nonfinancial corporate bond and leveraged loan downgrades remained very high in April and May. Defaults in corporate bonds and leveraged loans increased as well; market analysts projected defaults to increase considerably over the remainder of 2020 and into 2021.Financing conditions for small businesses tightened amid widespread continued pandemic-related closures and reduced operations of small businesses. Lenders indicated that they had tightened loan standards on small business loans or discontinued lending to such borrowers altogether (other than PPP loans). Financing conditions for state and local governments improved moderately following several Federal Reserve announcements to support the municipal debt market, but conditions remained somewhat strained for lower-rated states and municipalities. In the first week of June, the State of Illinois became the first to use the Municipal Liquidity Facility.Commercial real estate (CRE) lending conditions recovered somewhat during the intermeeting period. Spreads on triple-A-rated and triple-B-rated non-agency CMBS declined in May but remained elevated relative to before the pandemic, and issuance showed signs of recovery in late April and early May. Federal Reserve purchases of agency CMBS reportedly helped return spreads on these securities to their pre-pandemic levels, and issuance in that market continued to be strong. However, early signs of credit repayment difficulties emerged in some CRE sectors.The volume of mortgage rate locks for home-purchase loans picked up in mid-May following a material drop in April. Financing conditions remained tight for borrowers with relatively low credit scores and for those seeking nonconforming mortgages. In addition, options for home equity extraction continued to be restricted, as credit for both home equity lines of credit and cash-out refinances was limited. Servicers were able to handle the liquidity strains imposed by forbearance.The sharp decline in economic activity had also curtailed the demand for consumer credit. On balance, consumer credit financing conditions did not appear to be a major drag on household spending. Issuance of consumer asset-backed securities resumed in mid-April and in early May but remained significantly below pre-pandemic levels.Staff Economic Outlook The projection for the U.S. economy prepared by the staff for the June FOMC meeting was downgraded, on balance, as compared with the April meeting forecast in response to information on the spread of the coronavirus and changes in the measures undertaken to contain it both at home and abroad, along with incoming economic data. U.S. real GDP was forecast to show a historically large decline in the second quarter of this year, and the unemployment rate was expected to be sharply higher than in the first quarter. The substantial fiscal policy measures and appreciable support from monetary policy, along with the Federal Reserve's liquidity and lending facilities, were expected to help mitigate the deterioration in current economic conditions and to help boost the recovery.The staff continued to judge that the future performance of the economy would depend importantly on the evolution of the coronavirus outbreak and the measures undertaken to contain it. Under the staff's baseline assumptions that the current restrictions on social interactions and business operations would continue to ease gradually this year, real GDP was forecast to rise appreciably and the unemployment rate to decline considerably in the second half of the year, although a complete recovery was not expected by year-end. Inflation was projected to weaken this year, reflecting both the deterioration in resource utilization and sizable expected declines in consumer energy prices. Under the baseline assumptions, economic conditions were projected to continue to improve, and inflation to pick back up, over the next two years.The staff still observed that the uncertainty related to the economic effects of the coronavirus pandemic was extremely elevated and that the historical behavior of the U.S. economy in response to past economic shocks provided limited guidance for making judgments about how the economy might evolve in the future. In light of the significant uncertainty and downside risks associated with the pandemic, including how much the economy would weaken and how long it would take to recover, the staff judged that a more pessimistic projection was no less plausible than the baseline forecast. In this scenario, a second wave of the coronavirus outbreak, with another round of strict limitations on social interactions and business operations, was assumed to begin later this year, leading to a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year. Compared with the baseline, the disruption to economic activity was more severe and protracted in this scenario, with real GDP and inflation lower and the unemployment rate higher by the end of the medium-term projection.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 2020 through 2022 and over the longer run, based on their individual assessments of appropriate monetary policy—including the path for 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. These projections are described in the Summary of Economic Projections, which is an addendum to these minutes.Participants noted that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices were holding down consumer price inflation. Financial conditions had improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.Participants agreed that lowering the federal funds rate to its ELB had established more accommodative financial conditions and that the Federal Reserve's ongoing purchases of sizable quantities of Treasury securities and agency MBS had helped restore smooth market functioning to support the economy and the flow of credit to U.S. households and businesses. The fiscal response to economic developments had been large and timely and was providing much needed support for economic activity. Credit flows and economic activity were also being supported by the lending facilities established under the authority of section 13(3) of the Federal Reserve Act with the approval of the Secretary of the Treasury.Participants judged that the effects of the coronavirus outbreak and the ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term and would pose considerable risks to the economic outlook over the medium term. Participants agreed that the data for the second quarter would likely show the largest decline in economic activity in post–World War II history. Based in part on information from their Districts, participants observed that the burdens of the present crisis were not falling equally on all Americans and noted that the rise in joblessness was especially severe for lower-wage workers, women, African Americans, and Hispanics. Participants agreed that recently enacted fiscal policy programs had been delivering valuable direct financial aid to households, businesses, and communities, as well as providing relief to disadvantaged groups.Regarding household spending, participants pointed to information from District contacts, to surveys of consumer behavior, and to high-frequency indicators—such as credit card transactions, automated teller machine visits, and cellphone data tracking—as suggesting that consumer expenditures may be stabilizing or rebounding modestly. Limited available sources of standard economic data, such as retail purchases and motor vehicle sales, also seemed in line with this impression. With supportive monetary policy and payments to households under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), including enhanced unemployment insurance payments, participants expected personal consumption expenditures to grow strongly in the second half of the year, albeit from very low levels. However, the recovery in consumer spending was not expected to be particularly rapid beyond this year, with voluntary social distancing, precautionary saving, and lower levels of employment and income restraining the pace of expansion over the medium term.Participants noted that levels of uncertainty and risks perceived by businesses remained high and that these factors continued to contribute to restraints on capital expenditures, despite easing in financing conditions stemming in part from recent policy measures. Some business contacts pointed to halting improvements in consumer demand, a dearth in public infrastructure projects due to strained state and local government budget conditions, or the decline in energy prices as factors likely to depress business spending. Some participants also noted reports of firms stating that they have had some challenges in rehiring employees, in part related to temporary enhanced unemployment insurance benefits. Participants generally agreed that practices and developments in public health to address the pandemic would be critical for ensuring a strong and lasting reopening of businesses and reducing the likelihood of an outsized wave of closures, but monetary policy and, especially, fiscal policy would play important roles. Nevertheless, participants concluded that voluntary social distancing and structural shifts stemming from the pandemic would likely mean that some proportion of businesses would close permanently. Noting ongoing changes in the composition of production and the processes by which production takes place, participants suggested that some business adaptations were likely to endure long after the coronavirus subsides, resulting in notable dislocation and sectoral reallocation of firms and workers across industries.Participants noted that conditions in the energy sector remained difficult amid still-low oil prices. Several participants anticipated continued low drilling activity, at least until excess inventories were reduced later this year, and expressed concern that a wave of bankruptcies in the energy sector could be forthcoming. In addition, the agricultural sector continued to be under stress due to low prices for some farm commodities, reduced ethanol production, and pandemic-related limitations on production for some food processing plants.With regard to the labor market, participants remarked on the surprisingly positive news from the labor market report for May but emphasized that nearly 20 million jobs had been lost, on net, since February. Participants noted that because of misclassification errors in the Current Population Survey, the official unemployment rate for May likely understated the extent of unemployment; others observed that government reliance on unemployment insurance as a vehicle for income support under the CARES Act complicates the interpretation of the data. Participants also noted that unemployment insurance claims continued to run at a historically elevated level, but the proportion of laid-off workers who expected to be recalled was unusually large. Taken together, the data suggested that April could turn out to be the trough of the recession, but participants agreed that it was too early to draw any firm conclusions.Prospects for further substantial improvement in the labor market were seen as depending on a sustained reopening of the economy, which in turn depended in large part on the efficacy of health measures taken to limit the effects of the coronavirus. On this issue, participants judged there to be a great deal of uncertainty and expressed concerns about the possibility that an early reopening would contribute to a significant increase of infections. Participants also regarded highly accommodative monetary policy and sustained support from fiscal policy as likely to be needed to facilitate a durable recovery in labor market conditions. Overall, participants expected that a full recovery in employment would take some time.With regard to inflation, participants reiterated their view that the negative effect from the pandemic on aggregate demand was likely to more than offset any upward pressure from supply constraints so that the overall effect of the outbreak on prices was seen as disinflationary. Consistent with that interpretation, participants observed the recent negative readings on the monthly CPI and noted that they anticipated that the 12-month PCE inflation measure would likely run well below the Committee's 2 percent objective for some time. Observing that inflation had been running somewhat below the Committee's 2 percent longer-run objective before the coronavirus outbreak, some participants noted a risk that long-term inflation expectations might deteriorate. Participants noted that a highly accommodative stance of monetary policy would likely be needed for some time to achieve the 2 percent inflation objective over the longer run.Participants commented that there remained an extraordinary amount of uncertainty and considerable risks to the economic outlook. Participants shared views on possible outcomes for the reopening of the economy, the prospects for effective voluntary social distancing, and the efficacy of public health initiatives for their implications for economic activity and employment. A number of participants judged that there was a substantial likelihood of additional waves of outbreaks, which, in some scenarios, could result in further economic disruptions and possibly a protracted period of reduced economic activity. Other possibilities included economic activity that might recover more quickly if sizable, widespread outbreaks could be avoided even as households and businesses relax or modify social-distancing behaviors. Among the other sources of risk noted by participants were that fiscal support for households, businesses, and state and local governments might prove to be insufficient and that foreign economies could come under greater pressure than anticipated as a result of the spread of the pandemic abroad. Participants stressed that measures taken in the areas of health-care policy and fiscal policy, together with actions by households and businesses, would shape the prospects for a prompt and timely return of the U.S. economy to more normal conditions. In addition, participants agreed that recent actions taken by the Federal Reserve had helped reduce risks to the economic outlook.As part of their discussions of longer-run risks, participants noted that in some adverse scenarios, more business closures would occur, and workers would experience longer spells of unemployment that could lead to a loss of skills that could impair their employment prospects. In addition, to the extent that transmission-mitigation procedures adopted by firms reduced their productivity, or if the reallocation of industry output resulted in a lasting reduction in business investment, the longer-run level of potential output could be reduced.Regarding developments in financial markets, participants agreed that ongoing actions by the Federal Reserve, including those undertaken in collaboration with the Treasury, had helped ease strains in some financial markets and supported the flow of credit to households, businesses, and communities. Measures of market functioning in the markets for Treasury securities and agency MBS had improved substantially since March. Strains in short-term funding markets had receded as well, and the volume of borrowing at many of the Federal Reserve's liquidity facilities had moved lower as borrowers returned to market sources of funding. Risk spreads across a range of fixed-income markets had narrowed as the intense flight to safety witnessed in financial markets in the spring ebbed further.In their consideration of monetary policy at this meeting, participants reaffirmed 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. In light of their assessment that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term, all participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to 1/4 percent. Keeping the target range at the ELB would continue to provide support to the economy and promote the Committee's maximum-employment and price-stability goals. Participants also judged that it would be appropriate to maintain the target range for the federal funds rate at its present level 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.Participants also agreed that, to support the flow of credit to households and businesses, over coming months it would be appropriate for the Federal Reserve to increase its holdings of Treasury securities and agency MBS and agency CMBS at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations. Participants noted that it would be important to continue to monitor developments closely and that the Committee would be prepared to adjust its plans as appropriate.Participants also commented that the lending facilities established by the Federal Reserve under the authority of section 13(3) of the Federal Reserve Act were supporting financial market functioning and the flow of credit to households, businesses of all sizes, and state and local governments. Several participants commented further that it would be important for the Federal Reserve to remain ready to adjust these emergency lending facilities as appropriate based on its monitoring of financial market functioning and credit conditions.Participants agreed that the current stance of monetary policy remained appropriate, but many noted that the Committee could, at upcoming meetings, further clarify its intentions with respect to its future monetary policy decisions as the economic outlook becomes clearer. In particular, most participants commented that the Committee should communicate a more explicit form of forward guidance for the path of the federal funds rate and provide more clarity regarding purchases of Treasury securities and agency MBS as more information about the trajectory of the economy becomes available. A number of participants judged that it was important for forward guidance and asset purchases to be structured in a way that provides the accommodation necessary to support rapid economic recovery and fosters a durable return of inflation and inflation expectations to levels consistent with the Committee's symmetric 2 percent objective. Many participants remarked that the completion of the monetary policy framework review, together with the announcement of the conclusions arising from the review and the release of a revised Committee statement on its goals and policy strategy, would help clarify further how the Committee intends to conduct monetary policy going forward.Committee Policy Action In their discussion of monetary policy for this meeting, members agreed that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health had induced sharp declines in economic activity and a surge in job losses. Consumer price inflation was being held down by weaker demand and significantly lower oil prices. Financial conditions had improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households, businesses, and communities. 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.Members further concurred that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable downside risks to the economic outlook over the medium term. In light of these developments, members decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. Members noted that they expected to maintain this target range 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.Members agreed 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 would use the Committee's tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, members noted that they would assess realized and expected economic conditions relative to the Committee's maximum-employment objective and its symmetric 2 percent inflation objective. 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.To support the flow of credit to households and businesses, members agreed that over coming months it would be appropriate for the Federal Reserve to increase its holdings of Treasury securities and agency MBS and agency CMBS at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations. Members agreed that they would closely monitor developments and be prepared to adjust their 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, for release at 2:00 p.m.:"Effective June 11, 2020, 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 coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 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.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.To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments 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, 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 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 June 11, 2020.It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, July 28–29, 2020. The meeting adjourned at 10:05 a.m. on June 10, 2020.Notation Vote By notation vote completed on May 19, 2020, the Committee unanimously approved the minutes of the Committee meeting held on April 28–29, 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. Attended through the discussion of economic developments and the outlook, and all of Wednesday's session. Return to text4. Attended through the discussion of forward guidance, asset purchases, and yield caps or targets. Return to text5. Attended through the discussion of economic developments and the outlook. Return to text6. Attended from the discussion of economic developments and the outlook through the end of Tuesday's session. 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 06 10Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco today hosted a virtual ceremony to recognize the recipients of this year’s FinCEN Director’s Law Enforcement Awards. FinCEN announced this year’s recipients in May. In addition, Director Blanco recognized the swift and tremendous efforts of law enforcement, prosecutors, financial institutions, and others to confront wide scale fraud and money laundering associated with COVID-19 relief efforts.
drag me to text box!FinCEN Director Hosts Virtual Law Enforcement Awards ProgramFinancial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco today hosted a virtual ceremony to recognize the recipients of this year’s FinCEN Director’s Law Enforcement Awards. FinCEN announced this year’s recipients in May. In addition, Director Blanco recognized the swift and tremendous efforts of law enforcement, prosecutors, financial institutions, and others to confront wide scale fraud and money laundering associated with COVID-19 relief efforts.
drag me to text box!FinCEN Director Hosts Virtual Law Enforcement Awards ProgramThe Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board today invited comment on a proposed rule that would amend the recordkeeping and travel rule regulations under the Bank Secrecy Act. FinCEN and the Board, pursuant to their shared authority, are proposing amendments to the recordkeeping rule jointly, while FinCEN, pursuant to its sole authority, is proposing amendments to the travel rule. Under the current recordkeeping and travel rule regulations, financial institutions must collect, retain, and transmit certain information related to funds transfers and transmittals of funds over $3,000. The proposed rule lowers the applicable threshold from $3,000 to $250 for international transactions. The threshold for domestic transactions remains unchanged at $3,000. The proposed rule also further clarifies that those regulations apply to transactions above the applicable threshold involving convertible virtual currencies, as well as transactions involving digital assets with legal tender status, by clarifying the meaning of “money” as used in certain defined terms. Comments will be accepted for 30 days after publication in the Federal Register. Read the Notice of Proposed Rulemaking here.### Media Contacts:Federal Reserve Board Eric Kollig (202) 452-2955 FinCEN Steve Hudak (703) 905-3770
drag me to text box!Agencies Invite Comment on Proposed Rule under Bank Secrecy Act