|

FOMC Minutes: Increased challenges for economy in coming months due to COVID-19 surge

Minutes of the FOMC's December 15-16 meeting showed on Wednesday showed that policymakers judged it was appropriate to continue asset purchases at least at the current pace.

Market reaction

The US Dollar Index largely ignored this statement and was last seen gaining 0.08% on the day at 89.50.

Key takeaways as summarized by Reuters

"Participants agreed that the path of the economy would depend on the course of the virus."

"Participants regarded the positive news on vaccine development as further strengthening the medium-term outlook for household spending."

"Participants said judgment on substantial further progress would be broad, qualitative and not based on specific numerical criteria or thresholds."

"Participants saw increased challenges for the economy in the coming months due to COVID-19 surge, social distancing and reduced spending, especially on services requiring in-person contact."

"Various participants noted the importance of clearly communicating assessment progress toward goals well in advance of the time warranted for a change in the pace of asset purchases."

"Participants remarked that labor market conditions generally had continued to improve but were still a long way from maximum employment goal."

"A couple of participants were open to weighting purchases of treasury securities toward longer maturities."

"Participants generally judged asset purchases were delivering very significant policy accommodation."

"Some participants expressed concern about potential for lasting damage to the labor market."

"Some participants noted Fed in future could add to amount, duration of asset purchases if deemed appropriate to obtain goals."

"Participants noted soft inflation patterns were expected to continue in the near term as pandemic concerns intensified over the winter."

"A few participants underlined the importance of evaluating the costs and risks of asset purchases against the benefits."

"Participants generally saw downward pressures on inflation starting to abate in 2021 with vaccine roll-out."

"Participants underlined differences in credit availability across borrowers, as financing conditions eased for large corporations but tightened for small businesses and households."

"A number of participants noted that once substantial progress had been attained, Fed could begin gradual tapering."

"A number of participants noted that eventual QE taper could follow sequence similar to 2013 and 2014 taper."

"A number of participants noted that they saw downside risks associated with the lapse of emergency "13-3" programs on December 31."

"Participants continued to see the uncertainty surrounding the economic outlook as elevated."

"All participants supported the decision to adopt qualitative, outcome-based guidance for asset purchases."

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
Share:

Editor's Picks

AUD/USD recovers toward 0.7000 amid improving mood

AUD/USD is firming up toward 0.7000 in Asia on Tuesday, helped by improving market mood. A pause in the US Dollar rebound also aids the pair's upside. However, geopolitical risks and caution ahead of AI tech earnings report could limit the pair.

USD/JPY flatlines near 158.50 as markets seek direction

USD/JPY steadies around 158.50 in the Asian trading hours on Tuesday. Traders prefer to wait on the sidelines ahead of Japan’s National Consumer Price Index inflation data later on Friday. Meanwhile, elevated US bond yields provide some support to the US Dollar against the Japanese Yen.

Gold extends losses as rising Oil prices reinforce Fed rate hike bets

Gold (XAU/USD) drifts lower on Tuesday, extending losses for a third consecutive day as rising Oil prices linked to tensions in the Middle East keep global inflation risks tilted to the upside, reinforcing expectations that interest rates will remain higher for longer.

Crypto Today: Bitcoin, Ethereum, XRP tick lower amid mixed ETF flows

Bitcoin is trading above $81,000 on Tuesday, aligning with a lethargic tone in the broader cryptocurrency market. Altcoins, including Ethereum and Ripple, reflect Bitcoin’s lock-step price action, trading below $2,400 and $1.30, respectively.

Markets at a turning point: Bitcoin, Gold, FX and Tech react to a heavy macro week

The new trading week opens with a mixed but revealing picture across global markets. Indices, commodities, FX, tech stocks, and cryptocurrencies are all sending one message: risk appetite is alive, but it is cautious, selective, and highly sensitive to macro signals.

The US Dollar fell. Gold didn't rally. That tells you everything
Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.