Not Likely To Stop Market Speculation

The Fed once again met expectations by not changing rates and not changing its asset purchase program (QE). The Fed noted the recent economic slowdown in its new statement seen in the image below. The Fed stated, “The pace of the recovery in economic activity & employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.”

It also mentioned how the progress on vaccines would impact the trajectory of the recovery. That’s about it for the changes to this statement. Since the last meeting, millions more people have been vaccinated, the stimulus passed, and the data has gotten worse. The next change will be when the reopening commences this spring. We think the fact that the Fed hasn’t reacted to the latest speculation in stocks implies it will never react to it. The Fed doesn’t want to risk hurting the recovery just to clamp down on retail speculation.

Powell’s Presser

Powell’s press conference was slightly more interesting than the bland statement. Powell said, “The economy is a long way from our monetary policy and inflation goals, and it’s likely to take some time for substantial further progress to be achieved. He added, policy will stay “highly accommodative as the recovery progresses.” A lot of progress is needed, but it might not take that much time because there will be rapid improvement after the reopening. Is 6 months a long time? It’s not. However, Powell is saying it will take a long time because he wants to show the market he is as dovish as possible.

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