The full FOMC statement from the October 2021 meeting

FOMC statement October 2021

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months, but the summer’s rise in COVID-19 cases has slowed their recovery. Inflation is elevated, largely reflecting factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy continues to depend on the course of the virus. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. Risks to the economic outlook remain.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run 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. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In light of the substantial further progress the economy has made toward the Committee’s goals since last December, the Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage‑backed securities by at least $35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook. The Federal Reserve’s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

European major indices closing mixed

UK’s FTSE 100/Spain’s Ibex are lower

The major European indices are ending the session with mixed results. The provisional closes are showing:
  • German DAX, flat
  • France’s CAC, +0.4%
  • UK’s FTSE 100 -0.4%
  • Spain’s Ibex, -1.0%
  • Italy’s FTSE MIB +0.5%
In other markets, as London/European traders look to exit shows:
  • Spot gold is trading down $24.65 or -1.38% at $1762.76
  • Spot silver is down $0.32 or -1.37% at $23.18
  • WTI crude oil futures are down around three dollars or -3.56% at $80.92. The low price reached $80.66 between a swing area between $80.58 and $80.78
  • Bitcoin is trading down $875 at $62,380
In the forex market, the GBP is fighting with the NZD as the s strongest of the majors. The JPY is the weakest. The USD is mixed with marginal gains and losses versus the EUR, JPY, CHF, CAD and AUD. The greenback is lower verse the GBP and NZD. The market is awaiting the FOMC decision at 2 PM.

Weekly Crude oil inventories 3.291M vs 2.225M estimate

Private data showed a 3.59M build for crude

The EIA is now with their weekly inventory data.  This comes after the private data showed crude oil inventories showed a higher build of 3.59M while gasoline inventories showed a draw of -0.55M (vs -1.33M est).

  • Crude oil inventories 3.291M versus estimates of 2.225M
  • Gasoline inventories 0.104M vs estimates of -1.33M.
  • Distillates inventories 2.16M vs estimates of -1.443M
  • Cushing inventories -0.916 M versus previous of -3.899M
  • inventories in US strategic petroleum reserve off 1.6 million barrels to 612.54M
  • refining utilization 1.200% versus expected 0.6%. Previous 0.4%
  • crude oil production 11.5M versus 11.3M previously.  +1.77%
The private data released near the close of trading yesterday showed:
  • Crude oil +3.59M
  • Gasoline -0.55M.
  • Distillates, +0.57M.
  • Cushing,  -0.88M

PBOC says that 140 million people have opened accounts for digital yuan

China is pushing the digital yuan as the main alternative to cryptocurrencies

The figure may seem little but is significantly higher from the roughly 20 million wallets reported back in June here. The digital yuan was rolled out to users as part of government-led trials since last year and with wider adoption anticipated over time.
There is still a long way to go but as China looks to clamp down more on cryptocurrencies in general, expect them to push forward with a stronger agenda in promoting the use of the digital yuan among the public.
At the same time, one can expect more barriers to be put up against the likes of Alipay and WeChat pay – which we are already seeing here.

Welcome to Fed day

The FOMC meeting is the key focus in the day ahead

As such, one can expect quieter tones to prevail in the run up to that and in the European morning session ahead. As for what to expect from the Fed, I outlined some thoughts earlier in the week as per below:

I believe this one will be a bit more straightforward. However, the market reaction may not quite be as what the Fed may want it to be perhaps.

The recent flattening of the yield curve perhaps suggests something is awry with the financial outlook – one way or another – and even if the Fed plays its cards right, we may still see the trend continuing over the next few weeks.

The market is expecting a taper announcement by the Fed this week and they will surely deliver on that. The question then becomes how far are they willing to go to make clear that the taper process is not going to be correlated or isn’t going to translate immediately to rate hikes going into next year.

In that lieu, I would expect the Fed to reaffirm that they can opt to delay or slow down the taper process depending on market conditions but that will largely be semantics.

At the end of the day, the Fed is familiar with all this bullying and so is the market. I reckon that might not change until policymakers offer up a firm voice on the matter.

It’s all about seeing how much the Fed wants to push back against rate expectations, very much similar to the RBA situation going into yesterday’s meeting decision.

Latest Reuters poll show analysts still looking for higher currencies against the USD

Reuters poll of nearly 70 foreign exchange analysts showed continuing views that nearly all major currencies will be trading higher than current levels in the next 12 months

Reuters add:
  • a view these analysts have held for years, even as the dollar drifted higher.
Says the report:
  • currencies offering higher interest rates were expected to outperform
  • The British pound, the New Zealand dollar and the Canadian dollar were expected to gain 2.9%, 1.6% and 2% respectively. 
  • the euro and the Japanese yen, were not forecast to claw back their year to date loss of 5% and 9% over the next 12 months
Go to top