The Daily Update: FOMC / GameStop

In what was very much in line with expectations, the FOMC statement yesterday did not make any waves as the Fed left both interest rates and the pace of asset purchases unchanged. Officials did note that there were signs of slowing in economic activity since the previous meeting citing, ‘The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic’. However, it was also noted that the December fiscal stimulus package will be helpful for getting through the next few months.

In the press conference after the statement Federal Reserve Chair Jerome Powell countered market perceptions about inflation running away, saying significant forces have restrained global prices for decades and that dynamic is not likely to change. When asked if Congress's latest USD900bn fiscal relief package would be inflationary, he stressed inflation has averaged less than 2% for a quarter of a century due to advancements in technology and aging demographics. ‘It's very unlikely anything we see now would result in troubling inflation’ he said, adding, ‘If we did get sustained inflation level that was uncomfortable, we have tools for that’.

One topic of conversation that found its way not only to the Federal Reserve yesterday but also the The White House was the recent moves in GameStop shares. The stock closed in the US last night up more than 1,600% since the beginning of the year after the army of social media day traders, with access to free and low-cost trading platforms and a lot of time on their hands, continued to ramp the stock higher. At the Biden administration's daily press briefing, White House Press Secretary Jen Psaki told the media that Biden's ‘economic team, including Secretary Yellen and others, are monitoring the situation’, referring to the Game Stop spikes.