• FOMC 2020 decisions recap and 2021 voting change
• USDJPY: 100.00 as the critical level to watch
Happy New Year! As the first article in the year of 2021, we will start from FOMC’s 2020 recap and 2021 voting changes. FOMC’s meeting determines the direction of US economy and thus USD, so it is critical to closely monitor their stance and decisions.
In response to the COVID impact from March, FOMC has initiated a series of actions to step in. On Interest rates, the two meetings on March 3rd and 15th lowered the rate by 150bps to 0.00 – 0.25%, adding that “the rate is expected to remain low until members are confident the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”. In terms of QE, on March 23rd FOMC left the amount of QE open-ended after stating that they would buy securities “in the amount needed”. Later they confirmed that, the Fed would purchase at least $80 billion per month in treasuries and $40 billion per month in mortgage-backed securities. As for the inflation, FOMC updated the policy on longer-run goals and monetary policy strategy on August 27th, when they announced that the overall inflation target would be 2% over time and that policy decision will be informed by its assessments of the employment from its maximum level. In other words, they have put maximum employment as one of their most significant goals. On voting, in 2021, there will be some slight voting changes: Mester(hawk), Kashkari(dove), Kaplan(neutral) and Harker(neutral) will be replaced by Evans(dovish), Daly(neutral), Bostic(dovish), and Barkin(neutral). This indicates that, we will see a slightly more dovish voting panel which will be more inclined to keep the Fed rates lower for longer.
A list of FOMC meetings is as followed for readers to track: (*Meetings with Staff Economic Projections)
As for the Japanese Yen, 2020 has been tumultuous. The handover of the Japanese Prime Minister position when Shinzo Abe stepped down has also marked at least the beginning of the end on Abenomics. Abenomics is the economic strategy to reverse decades of lagging inflation, and the key approach was Yen weakness. From the end of 2012, Yen started to depreciate substantially. Now that Abe is no longer leading Japan, can those Abenomics-fueled Yen depreciation remain is the question to be watched. The critical level for USDJPY is at 100.00, which has once come into play in 2016.
Happy new year again and wish every reader a great year ahead!