As expected, the Federal Open Market Committee kept monetary policy unchanged in its January 27 monetary policy statement.

The FOMC said that it expects to keep the fed funds rate in its current range of 0.00% to 0.25% “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” The FOMC said that it expects to maintain its purchases of long-term Treasurys and mortgage-backed securities at the current pace of $120 billion per month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”

The paragraph on the fed funds rate and securities purchases was unchanged from the previous statement, on December 16.

In the section on current conditions, the FOMC noted that “the pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.” The FOMC is likely highlighting the December jobs report, which reported a decline in employment in leisure/hospitality services of almost 500,000 over the month, even as all other private industries added more than 400,000 jobs. In the December 16 statement the FOMC did not mention moderating growth.

In language unchanged from December 16, the January 27 statement expressed little concern about inflation, citing weak demand and the decline in oil prices in 2020 because of the pandemic and recession.

The January 27 statement did say that the “path of the economy will depend significantly on the course of the virus, including progress on vaccinations.” The reference to vaccinations was new.

The statement was approved unanimously.

There was little new in the FOMC’s monetary policy statement on January 27. The committee kept language on the fed funds rate and asset purchases unchanged and made minor tweaks to the language on current conditions.

With elevated unemployment, low inflation, and slower economic recovery at the end of 2020, the FOMC will maintain its very aggressive monetary policy stance throughout 2021. Short-term borrowing costs remain very low as the FOMC keeps its key policy rate, the fed funds rate, close to zero. And the FOMC continues to purchase large amounts of long-term Treasurys and mortgage-backed securities; this pushes down on longer-term rates. By keeping interest rates low, the central bank is encouraging borrowing by consumers and businesses. The expectation is that this will result in strong economic growth and lower unemployment, which will eventually push inflation slightly above the FOMC’s 2% objective.

PNC expects the FOMC to maintain long-term securities purchases at the current pace of $120 billon per month through 2021, and to keep the fed funds rate in its current near-zero range until 2024.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.