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The current stance of monetary policy is appropriate according to FOMC members. The Fed considers introducing a temporary asymmetric operational inflation target range, economists at Danske Bank inform.

Key quotes

“With respect to policy signals we did not learn much new, which also makes sense given the many Fed speeches recently. Consensus among FOMC members is that ‘the current stance of monetary policy is appropriate’ and that the Fed wants to see how the economy reacts to the three insurance cuts last year.”  

“The FOMC members had a long discussion about how to tweak the current symmetric 2% inflation target. They discussed the idea of a (temporary) asymmetric operational range with 2% being at or near the lower end of the range. This would signal to market participants that the Fed can tolerate inflation above 2% for some time without raising rates. Our base case is still that the Fed implements some sort of average inflation targeting this year, the question is the exact formulation of it.”

“The Fed is still seriously considering implementing a standing repo facility to make sure overnight rates do not surge again like last year.”

“With respect to the level of reserves, the Fed is still aiming at approximately USD1,500bn. This level is expected to be reached before April.”