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HomeWorld NewsPredictable FOMC decisions, GDP prognosis hinges on vaccination efforts

Predictable FOMC decisions, GDP prognosis hinges on vaccination efforts

The FED has reiterated their support for the market in the latest FOMC meeting on Wednesday. The board continues to acknowledge the virus as the main force that keeps the economic activity down and is hopeful that vaccinations can be one path out of economic risks.

Inflation rate targets are still set at or slightly above 2%, with a long term inflation rate at 2%. Monetary policy will remain unchanged for the time being with federal funds rate at 0 to 0.25% at least until labor market conditions are improved.

Furthermore, the FED will continue to increase holdings in Treasury securities at a rate of 80 billion dollars per month and agency mortgage-backed securities by at least 40$ billion per month. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

Thursday’s GDP 4th quarter of last year’s report showed an annualized growth of 4%. While this is an upward trend for the US economy, overall, the entire year of 2020 has seen the steepest decline for the economy since 1946. Much of the growth is maintained by this month’s stimulus checks for consumer spending and government spending, and housing market growth. Revised data shows a potential 5% growth for the year 2021. This could be dependent on the still debated fiscal plan for a total of 1.9 Trillion Dollars US, which sees a lot of resistance due to the reluctance in some policymakers to pump additional government funds into the economy after the previous 900 billion bill as an additional stimulus in December.