For the first time since the financial crisis more than a decade ago, the Federal Reserve made an emergency interest rate cut and reduce the benchmark fed funds rate by 50 basis points.
With the adjustment, the target range has been brought down to one percent and 1.50 percent.
The U.S. central bank finally blinked and revealed that officials are warning the coronavirus will have a severe impact on the national economic outlook. Some investors are anticipating the Fed to cut rates against at this month’s Federal Open Market Committee (FOMC) policy meeting.
In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate.
The magnitude and persistence of the overall effect on the U.S. economy remain highly uncertain and the situation remains a fluid one. Against this background, the committee judged that the risks to the U.S. outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.
There is a growing belief that the Fed could introduce a zero-interest-rate-policy (ZIRP) by the end of the year if Covid-19 still lingers in the summer.
It was not enough to lift the stock market as the Dow Jones cratered 600 points, the S&P 500 fell 2%, and the Nasdaq plunged 200 points. Gold surged $42 to $1,636 per ounce and silver jumped $0.39 to $17.13 an ounce.
This might explain why President Donald Trump wants even more rate cuts.
Leave a Comment