Free Trial

**MNI POLICY: FOMC Will Be 'Patient' Amid 'Muted Inflation'>

--Prepared to Adjust Balance Sheet Plan If Needed
--Rates Remain Primary Policy Tool
--Commits to Abundant Reserves Policy Implementation Framework
By Jean Yung
     WASHINGTON (MNI) - The following are the key points from the 
FOMC statement released Wednesday:
     --The FOMC held rates steady at a 2.25% to 2.5% range and said it 
"will be patient" in light of "muted inflation" and "global economic and 
financial developments," a pledge likely to be interpreted by investors 
as a bias toward keeping rates on hold for the first half of the year. 
     --In updated guidance on balance sheet normalization, the FOMC said 
it is "prepared to adjust any of the details for completing balance 
sheet normalization in light of economic and financial developments." 
However, it also emphasized that the fed funds rate is its "primary 
means" of adjusting the stance of monetary policy. It would consider 
only altering the size and composition of its balance sheet if 
conditions were to warrant a more accommodative policy "than can be 
achieved solely by reducing the federal funds rate," it said. 
     --Forward guidance on "further gradual increases" in rates was 
removed as well as its assessment on balance of risks, as the FOMC 
pivoted further toward data dependence. In place of a commitment to 
higher future rates, the committee said it continues to view economic 
growth, strong labor market conditions and inflation near its 2% 
symmetric target as "most likely outcomes." 
     --The FOMC formally committed to the abundant reserves policy 
implementation framework it has employed since the financial crisis, a 
decision long expected by market participants. The Fed intends to ensure 
control over short-term interest rates through the fed funds rate, 
rather than through open market operations to management reserves 
supply, it said. 
     --Its discussion of inflation noted that market-based measures of 
inflation compensation have "moved lower in recent months," though 
survey-based measures were "little changed" and overall inflation and 
core inflation "remain near" 2%. 
--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com
[TOPICS: MT$$$$,MMUFE$,M$U$$$,MAUDR$] 

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.