EUR/USD: Decisions of the Federal Reserve



The Federal Reserve has committed to leverage its full range of instruments to support the US economy during this challenging time. In particular, to help achieve its target, which is maximum employment and price stability.

To date, COVID-19 has caused enormous human and economic hardship in the United States and around the world. For instance, the pace of recovery in economic activity and employment has slowed in recent months, with weakness concentrated in the sectors hardest hit by the pandemic. Weak demand and earlier declines in oil prices have also contained consumer price inflation, but fortunately, overall financial conditions remain favorable, in part reflecting policies to support the economy and the flow of loans to US households and businesses.

Recovery largely depends on the situation with the virus and progress in vaccination. However, the ongoing public health crisis continues to weigh on economic activity, employment and inflation and pose significant risks to the overall outlook.

To add to that, the committee wants to achieve maximum employment and over 2% inflation in the long term. But since inflation will likely remain below this level for some time, the Committee will aim to achieve instead moderate inflation above 2%, so that inflation averages 2% in the long-term. For this to happen, the committee will then have to maintain a soft monetary policy for a long time, as well as federal funds rate at 0 to 1/4 percent, at least until labor market conditions reach levels agreed by the committee. The Federal Reserve will also continue increasing its holdings of at least $ 80 billion in Treasuries per month and mortgage-backed securities by at least $ 40 billion per month, until progress is seen on employment and prices.

In terms of assessing the appropriate monetary policy stance, the Fed will continue monitoring the economic outlook. The Committee is ready to adjust its policies accordingly, especially if risks that may interfere the achievement of the Committee's objectives arises. The Fed will take into account a wide range of information, including data on public health, labor market conditions, inflationary pressures and inflation expectations, as well as financial and international developments.

These measures are voted by Jerome H. Powell, Chairman of the Federal Reserve; John K. Williams, Vice Chairman of the Federal Reserve; Thomas I. Barkin; Raphael V. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary K. Daley; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

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