There were 3 outcomes possible from last week's important FOMC:
- No change to interest rates, which would be clear and certain, but a poor response to the current inflation.
- Unclear, uncertain, and weak action implied (dovish) and a take it as it comes mentality.
- A clear, certain, and aggressive path to raising rates (hawkish), which is the outcome we received.
Here is the summary from the federal reserve website:
- The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 0.15 percent, effective January 27, 2022.
- As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:
- "Effective January 27, 2022, the Federal Open Market Committee directs the Desk to:
- Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.
- Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by $40 billion and of agency mortgage-backed securities (MBS) by $20 billion, as indicated in the monthly purchase plans released in mid-January.
- Increase the SOMA holdings of Treasury securities by $20 billion and of agency MBS by $10 billion, during the monthly purchase period beginning in mid-February.
- Increase holdings of Treasury securities and agency MBS by additional amounts as needed to sustain smooth functioning of markets for these securities.
- Conduct overnight repurchase agreement operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.
- Conduct overnight reverse repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.
- Rollover at the auction all principal payments from the Federal Reserve's holdings of Treasury securities and reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS.
- Allow modest deviations from stated amounts for purchases and reinvestments, if needed for operational reasons.
- Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
- In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 0.25 percent. READ THE REST