The Federal Open Market Committee (FOMC) kept monetary policy unchanged at its meeting this week. The fed funds target rate remains in the range of 0.0% to 0.25%, and the Fed continues to purchase $80 billion of Treasuries per month, and $40 billion of agency mortgage-backed securities per month. While monetary policy remains unchanged, the Fed did announce the establishment of two standing repo facilities (domestic and international) to help support smooth market functioning. The FOMC has not committed to any specific timeline for tapering asset purchases but signaled that tapering is likely the next step if the economy continues to make significant progress toward their employment and inflation goals, and they will continue to discuss it at upcoming meetings. Fed Chair Powell said that another surge in COVID-19 infections may cause some disruption to the economy and labor market but noted with each successive wave of the virus there tends to be less of an economic impact. Overall, the Fed seems to be inching toward a path of policy normalization but the path and timing of monetary policy remains uncertain. As such, we expect financial market volatility may be elevated through year-end.
