The Fed Is Stuck On Interest Rates, Unable To Do Anything

By Mish Shedlock of MishTalk

Investment Advisor Representative - Sitka Pacific Capital Management • Nov 5, 2020 at 2:50 PM EST

As universally expected, the Fed left interest rate policy unchanged.

As universally expected, the Fed left interest rate policy unchanged.

Stuck in Glue

The Fed is stuck in glue. It did not change interest rates. Nor did it change much of its announcement as the WSJ Fed Statement Tracker shows.

No Dissents

Sarcastic News of the Day

And the results are in: it's a unanimous "yea" in favor of a largely unchanged FOMC statement...

(The news of the day is that Mary Daly voted in lieu of
Neel Kashkari who is on paternity leave) pic.twitter.com/LULAhiS4cQ
— Gregory Daco (@GregDaco) November 5, 2020

#Fed w/slightly bearish surprise. Keeps MonPolic steady as election votes tallied. Leaves rates unchanged near ZERO, repeats bond-buying stance. No material changes in the statement despite risk to the econ outlook. Raises modest risk of market disappointment to today’s outcome pic.twitter.com/EPCLTmDpyC
— Holger Zschaepitz (@Schuldensuehner) November 5, 2020

Effective Lower Bound

For discussion of the Effective Lower Bound (the point at which lowering rates further is counterproductive), please see:

June 4, 2019: Powell Ready to Cut Rates to "Effective Lower Bound" via "Conventional" Policy
September 25 2019: In Search of the Effective Lower Bound

Two Inflationary Tail Risks For US Investors

The Fed is stuck and will not lower rates below zero nor can it raise them without killing housing.

For discussion please see Two Inflationary Tail Risks For US Investors

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