CIBC Research discusses its reaction to today's FOMC December policy statement.
"The FOMC used today's announcement to maintain their policy stance while providing qualitative forward guidance on the QE program. Specifically, the statement added that asset purchases would continue until substantial further progress has been made toward reaching full employment and hitting the inflation target. They also specified the level of their purchases at $80 bn/month for Treasuries and $40 bn/month for agencies (the current run rate). We expect the Fed to extend the weighted average maturity (WAM) of purchases in early 2021 while reducing the overall volume of purchases, akin to the Bank of Canada's move that was looked favorably upon in the previous meeting's minutes," CIBC notes.
"The accompanying projections included an upgrade to 2020-22 GDP and a lower unemployment rate through the projection horizon, reflecting in part data received since the last round of projections, but rates were still shown as on hold through the end of 2023, proving that the vaccine announcements haven't altered their views," CIBC adds.