Watch FOMC Rewind: What the Fed’s November 2021 Decision Means for You
The Federal Open Market Committee has started to slow its bond buying as the U.S. economy continues to strengthen. In its November 2021 meeting statement, the Federal Reserve said that strong policy support and progress on vaccinations have benefited the economy. While the sectors most adversely affected by the pandemic have improved in recent months, the summer’s rise in COVID-19 cases has slowed their recovery. Meanwhile, supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.
The path of the economy continues to depend on the course of the virus. Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment. Considering the substantial further progress the economy has made, the Fed said that it will begin reducing the monthly pace of its net asset purchases.
The Committee kept the target range for short-term interest rates near zero and expects it will be appropriate to maintain this target until it meets the goals of maximum employment and price stability. The FOMC will continue to monitor new information on the economy and adjust their stance on monetary policy if needed.
What does this mean for you? Let’s rewind.
November 2021 FOMC Rewind
Curtis: Hey, Gus—what’s the latest from the Fed?
Gus: Latest is that the economy has made a lot of progress, so they began slowing their bond buying.
Curtis: That’s good, right?
Gus: Yeah! When COVID started, the Fed dropped short-term interest rates and began buying a lot of bonds. The bonds helped lower mortgage/other long-term rates further, which helped families & businesses get the financing they needed.
Curtis: So, is the economy back on track?
Gus: It’s a good start. The Fed said COVID outbreaks this summer slowed the recovery for some things, like travel.
Curtis: Oh right! Btw, did the Fed say anything about why prices are going up so much?
Gus: Yup, they said supply and demand are out of sync, which is related to the pandemic.
Curtis: How so?
Gus: COVID caused slowdowns for some companies. So when people started getting vaccinated & shopping again this year, companies couldn’t ship fast enough to keep stores stocked. That caused some prices to rise. But the Fed expects that to ease up once supply catches up.
Curtis: Nice! Thx for the update!
Gus: You bet!
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.