Fed Says ‘Full Range of Tools’ Will Support Economy During ‘Challenging Time’
The Federal Open Market Committee yesterday said it 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.”
Following its scheduled two-day policy meeting yesterday, the FOMC issued a statement (https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm) noting it will keep the federal funds rate at essentially zero percent and reiterating it will 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.” Additionally, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations.
“The Federal Reserve has pulled out all the stops to help the economy and financial markets weather the current pandemic,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. In its statement, he said, the FOMC “made clear that supports would remain in place until the economy regains full employment and inflation trends return to normal.”
Fratantoni said of note to the mortgage industry, while the FOMC did not specify a pace for agency mortgage-backed securities and commercial mortgage-backed securities purchases, it did highlight it “will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning.’ It is clear they want their actions to result in lower rates for mortgage borrowers, and recognize that this can only happen in the context of orderly markets. We expect that they will continue to modulate their purchases over the next few weeks, so long as markets remain stable.”
The full FOMC statement appears below:
“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 the monetary policy action were 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; and Randal K. Quarles.”