Fed facing 'tight balancing act' as policy left unchanged after FOMC meeting

Industry reaction as interest rates held close to zero

The US Federal Reserve now faces a "tight balancing act", according to several industry commentators, who warned the central bank's decision to keep its ultra-loose monetary policy unchanged has not deterred markets from focusing on "monumental" policy exit risk over the longer term.

Last night (27 January), the Federal Open Market Committee announced that interest rates would remain close to zero and that its QE programme would remain at $120bn of purchases per month as employment rates and inflation remain below target. While the statement acknowledged that economic recovery has moderated over recent months, it said further action remains dependent on the spread of the virus and the success of vaccination programmes. The market's reaction was muted at best, with the Dow Jones Industrial Average wavering before the announcement and ultimately closing down 2.1% fo...