FOMC Minutes: Increased challenges for economy in coming months due to COVID-19 surge

Minutes of the FOMC’s December 15-16 meeting showed on Wednesday showed that policymakers judged it was appropriate to continue asset purchases at least at the current pace.

Market reaction

The US Dollar Index largely ignored this statement and was last seen gaining 0.08% on the day at 89.50.

Key takeaways as summarized by Reuters

“Participants agreed that the path of the economy would depend on the course of the virus.”

“Participants regarded the positive news on vaccine development as further strengthening the medium-term outlook for household spending.”

“Participants said judgment on substantial further progress would be broad, qualitative and not based on specific numerical criteria or thresholds.”

“Participants saw increased challenges for the economy in the coming months due to COVID-19 surge, social distancing and reduced spending, especially on services requiring in-person contact.”

“Various participants noted the importance of clearly communicating assessment progress toward goals well in advance of the time warranted for a change in the pace of asset purchases.”

“Participants remarked that labor market conditions generally had continued to improve but were still a long way from maximum employment goal.”

“A couple of participants were open to weighting purchases of treasury securities toward longer maturities.”

“Participants generally judged asset purchases were delivering very significant policy accommodation.”

“Some participants expressed concern about potential for lasting damage to the labor market.”

“Some participants noted Fed in future could add to amount, duration of asset purchases if deemed appropriate to obtain goals.”

“Participants noted soft inflation patterns were expected to continue in the near term as pandemic concerns intensified over the winter.”

“A few participants underlined the importance of evaluating the costs and risks of asset purchases against the benefits.”

“Participants generally saw downward pressures on inflation starting to abate in 2021 with vaccine roll-out.”

“Participants underlined differences in credit availability across borrowers, as financing conditions eased for large corporations but tightened for small businesses and households.”

“A number of participants noted that once substantial progress had been attained, Fed could begin gradual tapering.”

“A number of participants noted that eventual QE taper could follow sequence similar to 2013 and 2014 taper.”

“A number of participants noted that they saw downside risks associated with the lapse of emergency “13-3″ programs on December 31.”

“Participants continued to see the uncertainty surrounding the economic outlook as elevated.”

“All participants supported the decision to adopt qualitative, outcome-based guidance for asset purchases.”