Morgan Stanley: Keeping Options Open

Morgan Stanley notes that what we learned re asset purchases at the November FOMC "is that options to re-calibrate the asset purchases have likely been developed and now presented by Fed staff, meaning that the FOMC now has options to pull off the shelf if and when it chooses to adjust its purchases."

• However, Powell's comments suggested that the FOMC does not appear ready to act on this, and remains satisfied with the current program, even if he stressed that the Fed's not yet out of tools.
• So, for MS, "further accommodation from the Fed is not a given should no further fiscal support come to pass". Powell would prefer to see fiscal working together with monetary policy.
• MS sees an extension of 13-3 facilities beyond this year as "highly likely", though the Fed is just turning to that now. Re potential additional steps here, the Fed retains the option to add to/change/extend facilities but as Powell said, "who knows".