December 14, 2020 — Final Fed Meeting of 2020 this Week


The Federal Reserve meeting is set for Tuesday and Wednesday this week, with the primary concern being the impact rising coronavirus cases are having on the economy.  Interest rates are effectively at zero, closing the door on stimulus from the Fed on that front, but they can still influence the markets through bond purchases.

The markets will look to the meeting to hear what the Fed needs to see to start interest rates moving upward and what form their asset purchase program will take in the coming weeks. The Fed has an inclusive full-employment mandate which will allow inflation to run above 2 percent, for a period of time, before acting on rates.  It is unlikely the Fed will expand its borrowing, as that will signal the economy is in worse shape than we currently believe.

The Fed is counting on short term relief through a stimulus package put forth by the government. It is expected the economy will have a bumpy start in 2021, as the vaccine is rolled out, growth should accelerate over the course of the year.

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