| The Federal Open Market Committee (“FOMC” or “The Fed”) left the Federal Funds Target Rate unchanged 0 to 0.25%. |
| As expected, the Fed decided not to begin tapering its balance sheet and instead left that decision for upcoming meetings in November and December. The official statement concluded that “if progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.” Per the FOMC’s statement, asset purchases are anticipated to remain on pace (treasuries $80 billion/month, mortgages $40 billion/month). |
| That said, the meeting contained some new news including an updated Summary of Economic Projections (“SEP”), most commonly referred to as the “dot plot”. Here, the most excitement came in the form of higher dots in 2022-2024. Specifically, the projection for the Federal Funds Rate in 2022 was increased from 0.125% in June (the date the Fed last updated its SEP) to 0.375% marking an even split between one hike and on hold. Furthermore, the Fed’s forecast for the Federal Funds Rate in 2023 were also revised higher from 0.625% to 1.00%, with rates forecasted to reach 1.75% in 2024. The long-run rate was unchanged at 2.5%. This was marginally more hawkish than anticipated for 2022, but consistent with a gradual pace of tightening once rate normalization commences. |
| As for the economic projections, the Fed’s assessment for economic growth in 2021 was lowered to 5.9% from 7.0% at the June meeting, but that was partially offset by a +0.5% increase in growth expectations in 2022 to 3.8%. Both figures are still comfortably above the long-term trend growth of the US economy. |
| Unemployment expectations edged higher this year to 4.8% versus 4.5% prior, while the Fed’s estimate for core PCE (their preferred indicator for inflation) was notably increased to 3.7% versus 3.0% in June. Overall, most of these revised projections were consistent with our expectations and did not represent a dramatic shift in expectations. In keeping with the Fed’s comfort to continue utilizing the Reverse Repo Facility (of “RRP”) to absorb excess liquidity in the front-end, the Committee also raised the individual counterparty limit from $80 billion/day to $160 billion/day. |
| During his press conference, FOMC Chairman Powell reiterated the difference between taper and lift-off, noting that the completion of tapering does not immediately signal rate hikes. |
| Immediately ahead of the Fed announcement, the Treasury market was demonstrating a modest bull flattening bias. Following the statement and release of the SEP, there was an extension of the flattening theme with 10-year yields down to 1.29%, stocks remained steady, and the dollar was lower. |
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Adak, City of
Alaska Association of Municipal
Clerks
Alaska Government Finance
Officers Association (AGFOA)
Alaska Industrial Development
Export Authority
Alaska Municipal League
Alaska Municipal Management
Association
Akutan, City of
Aleknagik, City of
Aleutians East Borough
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Anchorage Community
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Anchorage, Municipality of
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Atqasuk, City of
Barrow, City of
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Chevak, City of
Chuathbaluk, City of
Cold Bay, City of
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Delta Junction, City of
Denali Borough
Dillingham, City of |
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Eagle, City of
Eek, City of |
Egegik, City of
Elim, City of
Fairbanks, City of
Fairbanks North Star Borough
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Haines Borough
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Juneau, City and Borough of
Kake City School District
Kenai, City of
Kenai Peninsula Borough |
Ketchikan Gateway Borough
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Kodiak, City of
Kodiak Island Borough
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Manokotak, City of
Marshall, City of
Matanuska-Susitna Borough
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Nenana, City of
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Nightmute, City of
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| North Slope Borough School District |
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Northwest Arctic Borough
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Pelican, City of
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Sand Point, City of
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Seldovia,City of
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Sitka, City and Borough of
Soldotna, City of
Southeast Conference
Southwest Alaska Municipal
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Toksook Bay
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Upper Kalskag
Valdez, City of
Wasilla, City of
Whittier, City of
Wrangell, City and Borough of
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