The FOMC statement of January 31 included no change in the current fed funds target rate of 5.25-5.50 percent. It was also quite hawkish in tone, probably to discourage any market expectations that a rate cut is in the immediate future, or that when the time comes that rate cuts will be anything but undertaken with caution.

There was not much change to the assessment of economic conditions. Activity was downgraded slightly from"strong" to"solid", while job gains continued to be called"strong" and the unemployment rate"low". As to inflation, it"has eased over the past year but remains elevated."

There are some changes in the statement wording that should be noted.

First, the paragraph regarding the US banking system is completely excised. Clearly policymakers feel the troubles in the banking industry of last March and the potential problems with liquidity are no longer a big risk.

Second, the FOMC is giving more solid forward guidance. The statement offered a strong warning that the FOMC is not yet ready to declare victory in achieving price stability. There was new language in the statement that said,"The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks." After announcing it was maintaining the current fed funds rate, the FOMC emphasized its caution about the progress made in returning inflation towards the 2 percent objective, while making it clear that more is needed before rates start to come down. The statement said,"In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."

There was no change in the program to reduce the Fed's holding at depository institutions.

After raising the possible number of future rate cuts but keeping rates unchanged in December, the Fed against the backdrop of strong employment and solid growth is expected to once again keep rates unchanged at the January meeting.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.