2021 January FOMC Meeting: Fed Prepares For A Tough Year

At its January meeting, the Federal Open Markets Committee (FOMC) left rates unchanged, surprising no one.

Congress has authorized an additional $900 billion in additional stimulus spending that Fed officials have so desperately sought since last summer.

President Joe Biden is asking for even more relief for struggling Americans, in the form of a $1.9 trillion bill. His administration is also pushing to accelerate the pace of vaccinations to control the spread of Covid-19 and allow the economy to open back up faster. Life—and interest rates—won’t return to normal until that occurs.

“The path of the economy will depend significantly on the course of the virus, including progress on vaccinations,” read the Fed’s post-meeting statement. “The ongoing public health crisis continues to weigh on economic activity, employment and inflation, and poses considerable risks to the economic outlook.”
The Fed Remains Dovish
The economy has a long way to go before returning to full strength. Inflation remains shy of the Fed’s 2% target, and the unemployment rate currently stands at 6.7%, nearly double where it was before the pandemic recession.

In his post-meeting press conference, Fed Chair Jerome Powell said the real unemployment rate is probably closer to 10%. The broadest view of the unemployment rate, which takes into account people who work part-time but want full-time hours, as well as others marginally attached to the labor market, stands at 11.7%. Before the recession, that measure was 7%.

All of these factors lead economists to believe more fiscal support is required. The Fed is committed to increasing its purchases of Treasuries by at least $80 billion per month and to up buying of agency mortgage-backed securities by at least $40 billion per month for as long as it needs to. The FOMC won’t raise interest rates for years, perhaps not until 2023, as it attempts to support a convalescing economy.

“The Federal Reserve statement gave investors enough assurance that the central bank is committed to staying accommodative as the worsening Covid-19 pandemic continues to result in fresh job losses and a renewed slowing in the economy,” said Danielle DiMartino Booth, chief strategist of Quill Intelligence, a Dallas-based research firm.
Covid-19 Rages On
The ability of the Fed to reach its goals depends largely on the nation’s ability to stymie the Covid-19 onslaught. The explosion of cases from fall through much of January not only jeopardized the lives of hundreds of thousands of people, but also slowed the economy.

Employment “moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” noted the Fed. Fewer people pulling in a paycheck, along with cheaper oil prices, helped push down inflation.

Roughly 25 million vaccination shots have been administered in the U.S. through January 26, which is below the pace many officials had hoped for when the vaccines were first announced.
In a recent press conference, Biden said there would be enough vaccines for 300 million Americans, or roughly the entire country’s population, by the end of the summer.

The ability of his administration to achieve that goal will help determine just how quickly the economy returns to form.

*  *  *  *  *

December 2020 Fed Meeting: Waiting For Stimulus

When Federal Reserve officials met to discuss policy at the most recent Federal Open Markets Committee (FOMC) meeting they were nervously optimistic about the economy, according to minutes from the December 15-16, 2020 meeting.

FDA approval of multiple Covid-19 vaccines and stronger investor sentiment were big positives heading into the new year. The meeting took place before Congress passed and President Trump signed the $900 billion stimulus package that many, including Fed Chair Jerome Powell, had been calling for.

But risks still abounded. The Fed feared, justifiably, that vaccines would be slow to reach the arms of Americans, potentially prolonging state government-imposed lockdowns to thwart the coronavirus. There was also concern that a continuing spike in coronavirus cases would cause more lockdowns and less spending.

Policymakers ended the meeting by keeping interest rates near zero, as expected, where they will surely remain for years to come. But Fed officials also added some clarity on their bond purchasing game, signaling that it would take quite a bit more turbulence to increase bond buying from current levels.

Stimulus To The Rescue?

Ever since the summer, when much of the relief of the CARES Act was sputtering out, Powell has implored lawmakers on Capitol Hill to pass a second stimulus package. 

The case was pretty simple: March’s CARES Act proved wildly successful. Despite a crushing recession that hammered businesses across the country, many low- and middle-income Americans actually increased their level of financial security, thanks to CARES Act aid.

For instance, 48% of families earning up to $40,000 were able to afford an unexpected $400 expense this past July compared to 39% in October 2019, according to Federal Reserve data, a 23% jump. Savings rates skyrocketed, thanks in part to an additional $600-a-week in federal unemployment assistance that ran dry in the end of July. 

Some lawmakers had hoped that the economy would have been able to open enough to make another package unnecessary, but such hopes have been dashed by recents economic data.

More people are filing for first-time unemployment insurance, for instance, and retail spending disappointed. Consumers, moreover, are feeling less confident about making big purchases.

After months of false starts and dashed hopes, it appears that Congress is close to a stimulus deal, with a price tag rumored to be in the neighborhood of $900 billion. The new package would reportedly include direct checks to taxpayers and another round of increased unemployment aid.

Nothing has been finalized as of yet, but both parties have been determined to pass something before the New Year.

No New Clarity on Asset Purchases

Despite concerns, in December the Fed didn’t think would need to add to the pace of its $120 billion in monthly bond purchases. They offered little clarity on if, when or how they might change the policy.

“All participants supported enhancing the Committee’s guidance on asset purchases at this meeting and, in particular, adopting qualitative, outcome-based guidance indicating that increases in asset holdings would continue, with purchases of Treasury securities of at least $80 billion per month and of agency [mortgage-backed securities] of at least $40 billion per month, until substantial further progress has been made toward reaching the Committee’s maximum employment and price stability goals,” according to the minutes.

Close observers welcomed this language, and more in the future.

“We continue to think the Fed will eventually provide greater clarity with regard to balance sheet guidance after the new Administration takes office and the new Treasury Secretary (and former Fed Chair) has delivered the Treasury debt issuance strategy,” wrote Bob Miller, BlackRock’s Head of Americas Fundamental Fixed Income, in a note. “Incremental [quantitative easing] guidance could come as soon as March but seems more likely in the second quarter, which would also allow more time for virus related observations as well.”

Federal Open Market Committee (FOMC) FAQs

What Is the FOMC?

The Federal Reserve is in charge of monetary policy for the U.S., and the Federal Open Markets Committee (FOMC) is the committee that decides how to manage monetary policy. The FOMC meets eight times a year to debate interest rates, and vote on policies.

Who Belongs to the FOMC?

There are 12 members of the FOMC:


  • The seven members of the Fed Board of Governors, which is lead by Fed Chair Jerome Powell
  • Five of the 12 Federal Reserve Bank presidents, although the head of the Federal Reserve Bank of New York is a permanent member of the FOMC. The other four voting positions are filled on a rotating basis by the presidents of the other Federal Reserve Banks across the country. Even though most presidents don’t vote, they can all attend the meetings and debate policy.

When Is the Next FOMC Meeting?

The FOMC usually meets eight times a year, which translates to about once every six weeks. But the monetary governing body can meet more often if world events get crazy and the Fed believes it needs to act, such as during the outset of the pandemic.


The Fed had multiple unscheduled meetings in March when it decided to cut interest rates to near zero, and buy trillions of dollars of bonds to prop up the economy.


After this meeting, the FOMC meets on November 4th and 5th and then again on December 15th and 16th, the last meeting of the year. In that get-together, the FOMC will release a summary of economic projections, which lets the public know where it sees economic growth and inflation going in the near future.

What Time Are the FOMC Meeting Minutes Released?

The FOMC releases minutes of its meetings three weeks after the committee gathers. A full transcript isn’t available for a full five years after a meeting.

Will the FOMC Raise Rates in 2020?

The Fed is unlikely to raise rates this year thanks to the economic fallout from the coronavirus. In fact, the Fed could wait until 2022 to increase borrowing costs following its announcement to let inflation run a bit higher than its 2% target.

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