FOMC Discusses Fed Funds, the Economy, and Bond Buying


The Federal Open Market Committee (FOMC) met July 27-28 and once again voted to leave the Fed Funds overnight interest rate unchanged at the 0.00-0.25% range. The committee also voted unanimously to continue purchasing at least $80 billion of treasury securities and at least $40 billion of mortgage backed securities.

Fed Chairman Jerome Powell stressed that the Fed would be monitoring price levels due to the unanticipated fast growth of the economy and high inflation pressures. Once the meeting was over and various Fed officials returned to speaking engagements, several openly commented that the time to discuss reducing the bond purchasing program is rapidly approaching.

Assuming the Fed approaches the tapering of the bond purchase program similarly to the previous committee, it will take eight to 10 months after the decision is announced to eliminate the program. In the past, the Fed began reducing purchases by $10 billion per month until the bond buying was completely phased out. The Fed has stated it will not increase the Fed Funds rate until the bond buying program is terminated. 



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