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FOMC discusses monetary policy changes in path to economic recovery

FOMC discusses monetary policy changes in path to economic recovery

The Federal Open Market Committee (FOMC) held a meeting on national monetary policy from April 27 - 28, 2021. The press release from the meeting can be found here.

Since the COVID-19 pandemic triggered nationwide lockdowns and social distancing requirements in March of 2021, the economy has suffered. Unemployment rates skyrocketed, inflation decreased and people across the country fell into financial hardship.

In March of 2021, the FOMC held its annual meeting on monetary policy to discuss actions to help individuals as well as the economy as a whole. The meeting that took place this month assessed how FOMC policies are impacting the country and what additional changes may be merited.

Here, we will discuss how the progression of the pandemic has impacted the economy and how the Federal Reserve plans to respond to it, as discussed in the meeting.

Vaccination progress leads to economic growth

As of April 27th, 2021, 27% of the U.S. population has been fully vaccinated against COVID-19, and 43% of the population has received at least one dose, according to the vaccine tracker on USA facts, which is updated regularly.

As the number of COVID-19 cases drops, it becomes safer to gather both inside and outdoors. Businesses are opening up again, as this map from The New York Times demonstrates: Most states have reopened most of their businesses.

That being said, economic recovery is a slow process, and the FOMC discussed necessary actions to bring Americans the help they need.

FOMC monetary policy decisions

Here's a look at some of the policy decisions discussed in the April 2021 meeting:

Achieving unemployment and inflation rates

At the last FOMC meeting, the Federal Reserve set a goal to reach a maximum unemployment and inflation rate of 2%. Since the inflation rate has been running below that level over the course of the pandemic, the FOMC aims to raise the inflation rate above their goal for an extended period of time to create an overall average of 2%.

The Federal Reserve will continue their accommodative stance, redirecting money into the economy, until this goal is achieved.

Evaluating the target range for federal funds rate

Shortly after the COVID-19 pandemic began impacting the economy, the Federal Reserve set the federal funds rate at 0 - 0.25%. In this meeting, they decided to continue that rate.

The federal funds rate is the interest rates for banks borrowing money from other banks' excess reserves. When this rate is lower, banks have more power to lower interest rates for their customers, which helps Americans across the country.

Monitoring ongoing progress

As vaccine rollout continues and COVID-19 numbers continue to drop, it appears we are on the path to economic recovery.

These monetary policies implemented in the FOMC meeting are aimed at helping Americans, and should any risks or unexpected events come up that compromise the efficacy of these policies, they will be reassessed and altered.

It is The Federal Savings Bank's goal to help Americans reach their financial goals and recover from economic hardship. Contact us today for more information.