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by Fed Chairman Jerome Powell, April 28, 2021

Fed expected to leave rates unchanged, hint at economic revival. 

The Economic Outlook Press Conference was Live at 11:30AM on April 28, 2021.

The Fed wraps up its two-day policy meeting on Wednesday. The central bank is not expected to take any action, but economists expect it to defend its policy to let inflation run hot. Fed Chairman Jerome Powell holds a press conference after the decision is announced.

The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. 

Federal Open Market Committee

The Federal Open Market Committee (FOMC) consists of twelve members–the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. 

The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.

2021 Committee Members

• Jerome H. Powell, Board of Governors, Chair
• John C. Williams, New York, Vice Chair
• Thomas I. Barkin, Richmond
• Raphael W. Bostic, Atlanta
• Michelle W. Bowman, Board of Governors
• Lael Brainard, Board of Governors
• Richard H. Clarida, Board of Governors
• Mary C. Daly, San Francisco
• Charles L. Evans, Chicago
• Randal K. Quarles, Board of Governors
• Christopher J. Waller, Board of Governors

Press Conference:

The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. 

Powell says watching housing prices carefully; rise is because of low inventory, strong demand; says clearly strongest housing market since financial crisis

Powell says likely to take ‘some time’ for substantial further progress to be achieved; says fed will do everything we can to support recovery for as long as it takes.

“Readings on inflation have increased and are likely to rise somewhat further before moderating,” Fed chair Powell says. As the economy continues to reopen, “one-time increases in prices are likely to have only transitory effects on inflation.”

Powell says it would take time to move inflation expectations up, would expect that to come with strong labor market.

Powell says he expects people to return to labor force to fill jobs, maybe pay will go up; says may take some months to get back to equilibrium between labor supply and demand.

“Since the beginning of the year, indicators of economic activity and employment have strengthened,” Fed chair Powell says. “the sectors of the economy most adversely affected by the pandemic remain weak, but have shown improvement.”

Powell says during time of reopening we are likely to see upward pressure on prices, but will be temporary; says episode of one-time price increases is not likely to lead to persistent inflation.

Powell says one-time price increases as economy reopens is not likely to lead to persistently high inflation inconsistent with fed’s goals; says if do see inflation expectations materially above 2% would use tools to bring it down.

Powell says supply side will take time to adapt to strong surge in demand; says some asset prices are high.

“The economy is a long way from our goals and is likely to take some time for substantial further progress to be achieved,” he said. “We expect to maintain an accommodative stance to monetary policy until these employment and inflation outcomes are achieved.”

“With regard to interest rates, we continue to expect it will be appropriate to maintain the current zero to 0.25 percent target range for the federal funds rate until labor market conditions have reached levels consistent with the committee’s assessment of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” he added.

Summary: 

• Federal reserve keeps fed funds range unchanged at 0.00% to 0.25%
• Fed discount rate unchanged 0.25%
• FOMC: voted 11-0 for fed funds rate action
• FOMC: maintains $80 billion Treasury Security buying, $40 billion Mortgage Back Security (MBS) buying, per month
• FOMC benchmark interest rate unchanged; target range stands at 0.00% – 0.25% 
• Interest rate on excess reserves unchanged at 0.10%

FOMC statement says, “amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened”

• FOMC: fed will continue bond buying until substantial further progress on goals
• Fed continues to inflation “transitory”

FOMC:

1) Near-zero rates, $120 billion in asset purchases monthly;

2) No change in guidance or hint of bond tapering;

3) Economy, labor market have strengthened;

4) Inflation has risen, reflecting transitory factors;

Press Conference Transcript: https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20210428.pdf

Implementation Note issued April 28, 2021 https://www.federalreserve.gov/newsevents/pressreleases/monetary20210428a1.htm

FOMC Meeting Statement https://www.federalreserve.gov/monetarypolicy/files/monetary20210428a1.pdf

Press conference video: https://www.youtube.com/watch?v=cdRdjIJrh1I