MNI POLICY: TEXT: Federal Reserve Decision

By Greg Quinn

     WASHINGTON (MNI) - Following is the text of the Fed's decision Wednesday:

     The Federal Reserve is committed to using its full range of tools to

support the U.S. economy in this challenging time, thereby promoting its maximum

employment and price stability goals. 

     The coronavirus outbreak is causing tremendous human and economic hardship

across the United States and around the world. The virus and the measures taken

to protect public health are inducing sharp declines in economic activity and a

surge in job losses. Weaker demand and significantly lower oil prices are

holding down consumer price inflation. The disruptions to economic activity here

and abroad have significantly affected financial conditions and have impaired

the flow of credit to U.S. households and businesses. 

     The ongoing public health crisis will weigh heavily on economic activity,

employment, and inflation in the near term, and poses considerable risks to the

economic outlook over the medium term. In light of these developments, the

Committee decided to maintain the target range for the federal funds rate at 0

to 1/4 percent. The Committee expects to maintain this target range until it is

confident that the economy has weathered recent events and is on track to

achieve its maximum employment and price stability goals. 

     The Committee will continue to monitor the implications of incoming

information for the economic outlook, including information related to public

health, as well as global developments and muted inflation pressures, and will

use its tools and act as appropriate to support the economy. In determining the

timing and size of future adjustments to the stance of monetary policy, the

Committee will assess realized and expected economic conditions relative to its

maximum employment objective and its symmetric 2 percent inflation objective.

This assessment will take into account a wide range of information, including

measures of labor market conditions, indicators of inflation pressures and

inflation expectations, and readings on financial and international

developments. 

     To support the flow of credit to households and businesses, the Federal

Reserve will continue to purchase Treasury securities and agency residential and

commercial mortgage-backed securities in the amounts needed to support smooth

market functioning, thereby fostering effective transmission of monetary policy

to broader financial conditions. In addition, the Open Market Desk will continue

to offer large-scale overnight and term repurchase agreement operations. The

Committee will closely monitor market conditions and is prepared to adjust its

plans as appropriate. 

     Voting for the monetary policy action were Jerome H. Powell, Chair; John C.

Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida;

Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal

K. Quarles.

     Decisions Regarding Monetary Policy Implementation

     The Federal Reserve has made the following decisions to implement the

monetary policy stance announced by the Federal Open Market Committee in its

statement on April 29, 2020: 

     *The Board of Governors of the Federal Reserve System voted unanimously to

maintain the interest rate paid on required and excess reserve balances at 0.10

percent, effective April 30, 2020. 

     *As part of its policy decision, the Federal Open Market Committee voted to

authorize and direct the Open Market Desk at the Federal Reserve Bank of New

York, until instructed otherwise, to execute transactions in the System Open

Market Account in accordance with the following domestic policy directive: 

     "Effective April 30, 2020, the Federal Open Market Committee directs the

Desk to: 

     *Undertake open market operations as necessary to maintain the federal

funds rate in a target range of 0 to 1/4 percent. 

     *Increase the System Open Market Account holdings of Treasury securities,

agency mortgage-backed securities (MBS), and agency commercial mortgage-backed

securities (CMBS) in the amounts needed to support the smooth functioning of

markets for these securities. 

     *Conduct term and overnight repurchase agreement operations to support

effective policy implementation and the smooth functioning of short-term U.S.

dollar funding markets. 

     *Conduct overnight reverse repurchase agreement operations at an offering

rate of 0.00 percent and with a per-counterparty limit of $30 billion per day;

the per-counterparty limit can be temporarily increased at the discretion of the

Chair. 

     *Roll over at auction all principal payments from the Federal Reserve's

holdings of Treasury securities and reinvest all principal payments from the

Federal Reserve's holdings of agency debt and agency MBS in agency MBS and all

principal payments from holdings of agency CMBS in agency CMBS. 

     *Engage in dollar roll and coupon swap transactions as necessary to

facilitate settlement of the Federal Reserve's agency MBS transactions." 

     *In a related action, the Board of Governors of the Federal Reserve System

voted unanimously to approve the establishment of the primary credit rate at the

existing level of 0.25 percent.

     This information will be updated as appropriate to reflect decisions of the

Federal Open Market Committee or the Board of Governors regarding details of the

Federal Reserve's operational tools and approach used to implement monetary

policy. 

     More information regarding open market operations and reinvestments may be

found on the Federal Reserve Bank of New York's website.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: MAUDS$,MMUFE$,M$U$$$,MT$$$$,M$$CR$]