The Federal Open Market Committee (FOMC) appears to have struck a neutral balance in its November 3 meeting statement and Chair Jerome Powell’s post-meeting press conference. The Fed was careful to differentiate the formal start to monthly tapering of the asset purchase programme with future adjustments to the Federal Funds Rate. The Fed maintained the transitory inflation language, but specifically pointed to inflation “factors that are expected to be transitory” rather than inflation as a whole.
There were some notable changes to the statement. The most significant change was the widely anticipated announcement to the start of tapering. The Fed announced that it will pare its Treasury bond buying programme by $10bn each month and its agency mortgage-backed security purchases by $5bn beginning later this month and most likely lasting until mid-2022. From December, they will taper their Treasury purchases from $80bn to $70bn and will reduce their purchases of agency mortgage-backed securities from $40bn to $35bn.