Monetary Policy & Inflation | US
The last FOMC meeting of 2020 is upon us. Given the year we’ve just had we doubt the Fed wants to create any additional liquidity waves at this point. In my humble opinion, the Fed will also take a page out of the lame duck session concept and avoid introducing any major policy changes at this meeting. At most there could be a further clarification of its guidance on what will drive their QE policy and easing options discussed in the presser. Otherwise the Fed likely wants to close its 2020 chapter like everyone else.
We thought of recapping all the support mechanisms launched by the Fed. But upon review of the many press releases in 1H20 (with the introduction of new facilities day after day and week after week) this would turn into a much longer note. Instead, a brief recap is that the Fed slashed rates back to zero with one of the largest rate cut in history, purchased the largest amounts of USTs and MBS ever at the start of the crisis, re-introduced liquidity facilities and new programs for corporate credit and muni debt. They suspended many regulatory requirements and now target the average inflation level. Let’s just say this was the most active Fed easing, and by comparison 2008-09 looked like a dry run for what was executed in 2020.
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