E Fed Officials Project A Low Interest Rate Environment Until At Least The End Of 2023

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“The (FOMC) Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” (The Federal Reserve, Dec. 16, 2020)

At its last FOMC policy meeting for 2020, the Federal Reserve formally wrapped up what could turn out to be one its most activist year in its history.  To no one’s surprise, the Fed left its policy interest rates at rock bottom and to reconfirmed that it was willing to continue to massively support the economy through the challenging pandemic era.

The Feds last policy statement and economic projections indicate that its officials are currently somewhat more optimistic that the negative economic effect of the coronavirus pandemic will be smaller than it had expected in September. 

At its recent December 16th FOMC meeting, the Fed decided to continue holding its baseline interest rate range at 0 to 0.25%, and as the accompanying projections indicate, the federal funds rate is projected to remain at this level for a number of years.  

The following table reproduces two versions of the Fed officials’ consensus projections, a medium version, and a central tendency version. 

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