MNI POLICY: Fed Says Economy Has Slowed, Maintains QE and Rate

The Federal Reserve said Wednesday the economy's momentum has slowed in recent months and progress partly depends on the pace of Covid-19 vaccinations, while keeping guidance on QE worth USD120 billion per month and near-zero interest rates.

"The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic," the Federal Open Market Committee said in its post-meeting statement.

Today the FOMC affirmed that "the Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved."

The Fed last month offered new guidance on the path of its bond buys, signaling it would like to see "substantial further progress" toward its dual mandate of maximum employment and stable prices before considering a reduction in the monthly tally of asset purchases.

Since then, officials have signaled divergent views on the timing of such tapering, with some regional Fed bank presidents talking about possible cuts before year end while board governors have declined to lay out such a specific timetable.

Fed Chair Jerome Powell will answer questions from reporters staring at 2:30pm, and will likely be asked to make further clarifications on the matter.

"The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook," the unanimous decision read.

He will also likely get asked about how the recent shift toward a more proactive fiscal policy, with President Joe Biden proposing an additional USD1.9 trillion on top of the USD900 billion program approved last month, is affecting his outlook for growth.