US Fed "Tapering Asset Purchases by $15 Billion Monthly... Maintaining Zero Interest Rate" (Summary)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The U.S. Federal Reserve (Fed) announced that it will begin tapering its asset purchases, which were introduced to respond to the economic crisis caused by COVID-19, reducing the monthly $120 billion scale of asset purchases, and revealed specific plans.

On the 3rd (local time), the Fed stated in a statement released immediately after the conclusion of the Federal Open Market Committee (FOMC) meeting that it will start reducing net asset purchases by $10 billion in Treasury securities and $5 billion in mortgage-backed securities (MBS) each month.

The tapering is expected to be completed by July next year.

The Fed said it will increase Treasury holdings by at least $70 billion and MBS holdings by at least $35 billion each month starting at the end of this month, and from December, it plans to increase Treasury holdings by at least $60 billion and MBS holdings by at least $30 billion each month.

The Fed added that it will maintain the federal funds (FF) rate target at 0 to 0.25%, effectively maintaining a zero interest rate policy.

In the statement, the Fed said, "We pursue the goals of maximum employment and long-term inflation of 2% as initially targeted," and "We intend to maintain an accommodative monetary policy stance until these goals are achieved."

This is interpreted to mean that the Fed will maintain the FF rate target of 0 to 0.25% until maximum employment and average inflation of 2% are reached.

The statement continued, "In assessing the appropriate stance of monetary policy, we will consider a wide range of information," emphasizing, "including public health and labor market conditions, inflation pressures and expectations, as well as developments in financial and international markets." It added, "If the economic outlook changes, we will adjust the pace of purchases accordingly."

This content was produced with the assistance of AI translation services.