As we expected, the Federal Reserve stuck to its timeline for tapering its bond-buying program by reducing monthly purchases by another $10 billion.
This makes sense given that we felt it would take a significant improvement or deterioration in economic conditions to alter the Fed’s plans. And it’s further recognition that the recent downturn was at least partially due to bad weather.
The FOMC scrapped the unemployment target for the fed funds rate.
It’s clear that the unemployment rate is a flawed metric and doesn’t provide the bigger picture on labor-market conditions.
We expected the FOMC to continue to move toward more qualitative and holistic guidance on its target interest rate.
With the Fed now looking at metrics such as inflation, the fed funds rate should remain low for a longer period of time. This is good news for the economy and investors.
The Fed’s announcement helps confirm our view that we expect monetary policy to be looser for longer.
Financial repression should continue to alter the risk/reward profiles of different asset classes. As a result, investors should implement an asset-allocation strategy that reflects these conditions.