FOMC Minutes: Further easing looks unlikely – UOB

Senior Economist at UOB Group Alvin Liew reviewed the latest publication of the FOMC Minutes of the December meeting.

Key Quotes

“The minutes of the 15-16 Dec 2020 FOMC meeting showed that Fed officials unanimously agreeing to keep the pace of asset purchases unchanged, and that ‘nearly all’ preferred to keep the current mix of assets bought intact with some open to ‘future adjustments’ if needed.”

“The participants continued to see the uncertainty surrounding the economic outlook as elevated even as they regarded the positive news on vaccine development as an ‘upside risk’ and will further strengthen the medium-term outlook for household spending.”

“The unexpected ‘Blue Wave’ has led the markets to reposition for bigger fiscal stimulus and infrastructure spending as well as tax changes (tax cuts for households while tax increase for corporates and wealthy individuals).”

“We now price in a lower probability (40%) for the Fed to provide more monetary accommodation. If the Fed were to ease, it will still do so from its existing tool kits, and the first in line will still be the asset purchase program. We continue to hold the view that the Fed will keep policy rates at the current 0.0-0.25% region at least until 2023 and will not want to push rates beyond zero, into negative territory.”