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Federal Reserve Monetary Policy Decisions for July 2020

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In its most recent release on monetary policy, the Federal Reserve committed to using its full range of tools to support the U.S. economy. It acknowledged the economic challenges being faced. And emphasized goals of promoting maximum employment and price stability.

They reiterated that coronavirus outbreak continues to cause enormous human and economic difficulty across the United States and around the world. The release highlights that although economic activity and employment have picked up somewhat in recent months, they are still well below levels seen at the beginning of the year.

Weaker overall demand and dramatically lower oil prices are working to hold down consumer price inflation. The Fed states that financial conditions have generally improved over the last couple of months. This improvement is due in part to the policy measures taken to support the economy, including the flow of credit to U.S. households and businesses.

The Board of Governors of the Federal Reserve System voted unanimously to:

  • Maintain the interest rate paid on required and excess reserve balances at 0.10 percent, effective July 30, 2020.
  • Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.
  • Increase the System Open Market Account holdings of Treasury securities, agency mortgage-backed securities (MBS), and agency commercial mortgage-backed securities (CMBS) at least at the current pace to sustain smooth functioning of markets for these securities, thereby fostering effective transmission of monetary policy to broader financial conditions.
  • Conduct term and overnight repurchase agreement operations to support effective policy implementation and the smooth functioning of short-term U.S. dollar funding markets.
  • Conduct overnight reverse repurchase agreement operations at an offering rate of 0.00 percent and with a per-counterparty limit of $30 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.
  • Rollover at 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 and all principal payments from holdings of agency CMBS in agency CMBS.
  • 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.

Read the full Federal Reserve decision press release (PDF).

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