WASHINGTON—Newly released minutes from the most recent meeting of the Federal Open Market Committee (FOMC) indicate the Fed will likely keep rates near rock-bottom. The minutes from the June meeting, which was held via videoconference, further indicate Fed members do not see consumer demand rebounding at the level once envisioned.
“The minutes from the June FOMC meeting indicate that more specific forward guidance is forthcoming,” said NAFCU Chief Economist and Vice President of Research Curt Long. “That guidance is likely to tie the committee a holding rates at zero and maintaining or increasing asset purchases until some set date or until a threshold for economic improvement is achieved.
“Although more untested methods for lowering yields or flattening the yield curve do not appear to have much support, expanded use of existing tools, namely forward guidance and asset purchases, means that a low, flat yield curve is still likely to persist for several years,” Long added.
Of note, said Long, members expect personal consumption expenditures to grow strongly in the second half of the year, albeit from very low levels. However, participants suggest consumer spending recovery is not expected to be particularly rapid due to social distancing, precautionary saving, and lower levels of employment and income restraining the pace.
Other Notes from Meeting
During the meeting, Fed members also:
- Noted levels of uncertainty and risks perceived by businesses remained high and continue to contribute to restraints on capital expenditures
- Judged there to be a great deal of uncertainty regarding labor market improvement and expressed concerns about an increase in coronavirus cases as a result of an early reopening
- Pointed to relevant information from district contacts, surveys of consumer behavior and more that suggest consumer expenditures may be stabilizing or rebounding modestly
The FOMC is expected to meet next July 28-29; its tentative meeting schedule for 2020 can be viewed here.