On Wednesday, 25 November 2020, the Central Bank of the United States – Federal Reserve System (Fed) – published the minutes of the last meeting of the Bank’s key committee, namely the Federal Open Market Committee (FOMC). It is traditional practice for the minutes to be released within 3 weeks of the meeting. This time it revealed that FOMC members had a long discussion about the asset purchase program and suggested possible changes in advance before setting a fixed date.
Furthermore, the published minutes show that members of the Fed’s Federal Committee did not only address the level of interest rates, which were left unchanged, but expressed concern regarding the growth rate of the US economy and the year-on-year decline in gross domestic product (GDP). According to data from economic correspondents reported on the basis of data published by the Bureau of Economic Analysis (BEA), the economy recorded a year-on-year decline of 2.7 percent in the third quarter of 2020. However, compared to the second quarter of this year, GBP in the US increased by 8.1 percent. These published data indicate that the US economy performed better in the third quarter than the previous BEA estimate, which predicted year-on-year growth of “only” 8 percent and a year-on-year decline of 2.8 percent.
The international foreign exchange – Forex market reacted to the news of the state of the US economy. On 26 November at 9:47 am CET, according to the US Dollar Currency Index (DXY), the USD was seen at the price level of 91.99 with a very slight decrease of -0.01%. At the same time, the global currency pair EUR/USD fluctuated and traded on Forex at an exchange rate of US$ 1.192 per EUR, with the daily appreciation of the EUR by +0.05% so far. On the other hand, the USD strengthened by 0.05% against the Canadian dollar (CAD) at a mutual exchange rate of CAD 1.301 per USD.
Members of the FOMC – in the published minutes of the meeting which took place in early November 2020 on 4 and 5 November 2020 – also expressed concern about the pace of economic recovery, noting that growth was actually fast enough until about March 2020, i.e. in the run-up to the coronavirus pandemic. On 5 November during his press conference, Fed Chairman Jerome Powell stated that he felt that the Fed still has plenty of “political ammunition” and promised that the committee is “strongly committed to using these powerful tools to support the economy.” FOMC members suggested that in the coming months, the Fed should provide more details on what will be needed to adjust the program, which represents a Central bank balance sheet totaling close to US$ 7 trillion in order to support the economy through the coronavirus pandemic. Financial markets and their investors are already awaiting the outcome of the December FOMC meeting, where these details should be discussed and published.