ALEXANDRIA, Va.—Minutes from the Federal Open Market Committee's (FOMC) November videoconference meeting suggest the Fed is "positioning itself for an increase in asset purchases in December" to help sustain economic growth, said NAFCU’s Curt Long.
Members of the committee judged that immediate adjustments to the pace and composition of asset purchases were not necessary. However, circumstances could shift to warrant such adjustments, the always cautious Fed stated.
"Discussion during the November meeting indicates that the committee sees asset purchases as having successfully calmed Treasury markets in the early stages of the pandemic, and more recently, providing stimulus to the economy," said Long, NAFCU's chief economist and vice president of research. "NAFCU expects the yield curve to remain flat for an extended period, even as the broader economy shows robust improvement next year.”
Of note, some participants noted that households’ balance sheets generally appeared healthy and an unwinding of the large pool of household savings accumulated during the pandemic could provide greater-than-anticipated momentum to consumer spending over the coming months.
However, several participants expressed concern that in the absence of fiscal support, lower- and moderate-income households might need to reduce their spending sharply when their savings become exhausted.
Other Findings
Other key findings from the minutes, according to Long:
- Economic activity thus far had recovered faster than had been expected earlier in the year
- The current federal funds target rate – held at 0% to 0.25% following the committee’s July meeting – would be maintained until members were confident that the economy had weathered recent events and was on track to achieve the committee’s maximum employment and price stability goals
- With inflation running persistently below its longer-run goal, participants judged that it would be appropriate to aim to achieve inflation moderately above 2% for some time.
The FOMC is expected to meet next Dec. 15-16.