Interest rates in the USA are as such at record lows thus there was no way that tonight’s Fed meet would have anything to do with interest rates. It was expected to be all about a timeline to support the economy with large-scale bond buying and about getting some guidance on how long the Fed would be holding the interest rates near zero.
Since March, the Fed has been buying $120 billion a month and on this, the Fed said tonight that it would continue to buy the same, neither changing the size nor the composition of its asset purchases. It also did not change the program to buy more to provide stimulus.
The Fed also released new projections showing that majority expected interest rates to remain near zero at least through 2023. The interest rates have been maintained in a range of zero to 0.25% since March.
The Fed stated very clearly that the central bank will continue to increase its asset holdings at the current pace “until substantial further progress has been made toward” its employment and inflation goals.
So, the Fed wrapped up this tumultuous year in mankind’s history in recent times with a final scheduled policy, leaving interest rates at rock bottom and sent out a strong signal that it remain ready and willing to help the economy wade through these challenging times.
But what we don’t know and what the market needed to know was how long will this bond-buying stimulus continue. We do not know yet if in 2021, when things do return to some semblance of normalcy, the Fed will continue to extend these tweaks till economy goes back to pre-covid levels. And that explained why the US markets thought that this was a non-event and the stocks remained flat.
And even while the Fed announced its decision, news came in that Republicans and Democrats on Capitol Hill appeared to be nearing a $900 billion stimulus plan that would include both another round of direct stimulus payments to Americans and additional unemployment benefit. The plan was expected to also provide billions of dollars for vaccine distribution and to support schools and small businesses.
Once this does come in, the markets, in USA and in India will boom. For us in India, the big news is obviously the Cabinet approving the telecom spectrum auction to be held in March. It said that a notice inviting applications will be issued within this month.
The auction will be for spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz frequency bands and a total of 2251.25 MHz is being offered with total valuation of Rs.3,92,332.70 crore (at reserve price). Spectrum will be offered for assignment for validity period of 20 years.