While we wait for the election result, the Fed decided to hold on rates

The next President of the United States has yet to be decided, but the U.S. Federal Reserve (Fed) decided to keep the target range for its federal funds rate at 0-to-0.25%, as most expected. The Fed reiterated that the current rate level is appropriate until its maximum employment and 2% inflation targets are sustainably achieved.

In addition, to ensure smooth market operation and to maintain supportive financial conditions for households and businesses, the Fed will increase the purchasing of Treasury securities and agency mortgage-backed securities over the coming months.

The Fed doing its part to support the U.S. economy

The announcement once again illustrates the Fed’s commitment to use its full range of tools to support the U.S. economy during the COVID-19 pandemic. “Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation.”

The Fed continues to believe that COVID-19 developments will determine the path of the ongoing economic recovery. “The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

Positioned for lower rates

As the Fed's actions were broadly expected, our portfolios are appropriately positioned at this time. The announcement is aligned with our expectations for a prolonged period of supportive policy, subdued inflation, and lower interest rates. As a result, no material changes to our strategy are required at this time.

For more information, please stay tuned. We will provide further analysis of the U.S. election and what it means for policy now and over the longer term.

If you have any questions about this post, please do not hesitate to contact your MD Advisor*.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec).

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.